Photo Credit: Washington Post

While there are several tax implications in the proposed OBBB, it is hard to say what will make it to the final version. There are general things such as reducing regulation, increasing the deficit, and expanding the opportunity zone program that may impact real estate development.

Let’s talk about 2 of the pieces of the bill that may impact real estate investing.

Bonus Depreciation:

Restoring 100% bonus depreciation would incentivize development and upgrades by providing a way to write off a large loss early on in the property ownership. For example, if you buy a newer property or renovated property, you can take some early depreciation of the assets (building or furniture) which creates a large tax loss. If you are interested in this strategy, I can share more about how we did this on one of our rental properties at the 80% bonus depreciation number. We wrote off around $50k in expenses for a property that we renovated which lowered our W2 income tax liability. We have also received at least one buyer inquiry on our team of a high earning W2 couple looking for a Summit County STR to take advantage of the depreciation in the OBBB.

Estate and Gift Tax Exemption:

Maintaining a higher exemption threshold for estate and gift taxes could benefit high-net-worth individuals and potentially encourage real estate investment. The 2017 era increased estate exemptions to $13.99 million per individual and $19,000 per annual gift exclusion are set to expire at the end of 2025.

Time will tell what passes, and we will continue to provide updates once legislation is official. For now, if you are a high income W2 employee, you may want to look at the potential tax benefits of real estate.