Tax-saving benefits of acquiring rental properties under the OBBB

By Kevin Kalal, CPA MBT

There’s a lot going on in the world right now. As a result, the decision to acquire rental property might feel more complicated than usual. But there’s good news for real estate professionals who are weighing the pros and cons: The One Big Beautiful Bill Act (OBBB) has brought about significant tax advantages to investing in or acquiring real estate.

Here’s how, thanks to the OBBB, acquiring rental property could potentially save you money.

First, do you qualify as a “real estate professional?”

The OBBB’s tax changes are having a major impact on those who qualify as real estate professionals. To qualify as such in the eyes of the IRS, you must meet the following criteria:

• Perform more than 50% of your personal services in real estate trades or businesses in which you are consistently and substantially involved.
• Spend more than 750 hours of services during the tax year in real property trades or businesses, such as construction, developing, buying, operating, managing, and brokering realty, in which you are consistently and substantially involved.

What are the tax advantages of acquiring property?

One of the OBBB’s key provisions is the permanent restoration of 100% bonus depreciation on qualified property acquired and placed into service after January 19, 2025.

With 100% bonus deprecation, you can more easily take large write-offs related to real estate investments and acquisitions. Acquiring a property allows you to offset your other income by the losses you generate from the purchase—essentially saving you money.

While this certainly isn’t a new tax strategy for real estate professionals, the OBBB has made it substantially more advantageous.

How can you maximize your tax write-off?

A cost segregation study can help you fully leverage 100% bonus depreciation following the purchase of a property. Conducted by an engineer, this study identifies and reclassifies components of the property, potentially allowing you to depreciate certain components more quickly.

Bring clarity to your decision.

If you’re a real estate professional who is weighing a property acquisition, be sure to consider the now permanent 100% bonus depreciation.

The Abdo team is here to help you determine if a property acquisition (or disposition) makes sense for you. Our advisors can guide you through the tax planning process to ensure you’re taking advantage of available benefits while maintaining compliance.

To shine a light onto your next steps, contact us today.