The Big Beautiful Picture: What the New Bill Means for Real Estate in Texas
- Adriana Perez
- Jul 13
- 15 min read
Updated: Jul 13
Pro‑Real‑Estate, Pro‑Investor
Before we dive in, let me make something very clear:
I’m not a CPA, attorney, or financial advisor, and this post is not professional advice. I’m also not a political analyst or publicly endorsing any politician, including Donald Trump. This is not about political alignment; it’s about understanding the potential impact of the 2025 tax reform bill (formally known as H.R. 1: The One Big Beautiful Bill Act) on real estate, investing, and financial strategy.
This article is based solely on my personal interpretation of the available information, and it’s meant to offer insight, not instruction.
Every financial situation is different, and laws evolve, so before making any decisions related to taxes, real estate investing, or business structuring, please consult with a licensed tax professional, attorney, or financial advisor.
That said, if you’re someone who wants to better understand how this bill may shape opportunity and strategy, particularly in real estate, I hope this breakdown helps you think critically, plan smarter, and stay informed.
It’s no secret that today’s political climate feels tense, unpredictable, and, for many, exhausting. Families across Texas, especially in the Houston metroplex, are trying to keep their heads above water in the middle of economic uncertainty, rising property taxes, housing affordability challenges, and the lingering effects of inflation. Many are working harder than ever, just to maintain a quality of life that used to feel more attainable. Whether you’re running a small business, raising a family, managing rental properties, or just trying to plan for the future, it’s become increasingly difficult to know who or what to trust. The conversations at the dinner table aren’t about politics, they’re about survival, stability, and whether anything out there is actually helping the average person.
That’s why I wanted to break down this new bill, not from a political angle, but from a practical one. Because whether or not you follow the headlines, this legislation could impact your taxes, your investments, your housing costs, and your long-term strategy. So let’s take a closer look at what’s actually inside the One Big Beautiful Bill Act, and how some of it might work in your favor.
Backed by NAR and significant advocacy efforts, the One Big Beautiful Bill Act (H.R. 1, signed into law July 4, 2025) delivers sweeping tax reforms, and nearly all are positive for real estate investors. This law isn’t a temporary boost. It’s a long-term structural play: making key real estate tax provisions permanent and restoring predictability to the marketplace.
Let’s break down the updates, with key terms explained along the way.
Key Provisions Investors Need to Understand
1. Pass-Through Deduction (Section 199A)
The law permanently extends the 20% tax deduction for income earned through pass-through entities, structures like LLCs, S corps, and sole proprietorships, where the business income is reported on your personal tax return.
What is a pass-through entity?
A business structure where profits (and losses) "pass through" directly to the owner's personal tax return, avoiding corporate tax. Most real estate investors set up LLCs for this reason.
2025 Reform: What Changed?
1. Makes the 20% Deduction Permanent
Originally set to expire in 2026
Now permanently part of the tax code, offering long-term planning stability
2. Expanded Eligibility Through Phase-In Relief
Higher earners (above $182,100 single / $364,200 joint) previously phased out of the full deduction
The new bill widens the phase-in window, allowing more high-income business owners to benefit
New $400 minimum deduction added for those earning at least $1,000 — a lifeline for small landlords or one-property owners.
Who Qualifies?
To qualify for the Section 199A deduction:
You must own a pass-through entity (LLC, S-Corp, sole prop)
You must have qualified business income (QBI) — net profit from your real estate or business
The business must be domestic
You must not be a C-Corporation
Rental income generally qualifies — especially if:
You materially participate (active rental or STR)
You treat the activity as a trade or business
Or you group activities together as a single enterprise
How Much Can You Deduct?
Let’s say you earn $100,000 in net profit from rental properties in an LLC:
20% deduction = $20,000
You now only pay income tax on $80,000
At a 32% marginal tax rate, that’s $6,400 in federal tax savings per year.
This is on top of depreciation, cost segregation, bonus depreciation, and other write-offs, making real estate extremely tax-advantaged.
Limitations to Be Aware Of
Phase-Outs (but now more generous):
Above $364,200 (MFJ) / $182,100 (single), limits begin if you're in a "specified service trade or business" (lawyers, consultants, etc.)
Real estate is NOT considered a specified service.
Wage and Capital Limit:
At high income levels, the deduction is limited to the greater of:
50% of wages paid, or
25% of wages + 2.5% of the unadjusted basis of property
This rule can be bypassed through:
Smart ownership structures
Aggregating businesses
Professional tax planning
Combined with Other Benefits
Section 199A stacks beautifully with:
Bonus depreciation on building components
Cost segregation to accelerate deductions
Mortgage interest deduction (personal or investment)
Opportunity Zone deferrals and forgiveness
SALT deduction relief for high-tax property investors
It also adds a $400 minimum deduction for earners with at least $1,000 of qualified business income (QBI), giving smaller landlords and flippers a leg up.
2. Mortgage Interest Deduction — Locked In
Mortgage interest remains deductible, up to $750,000 in mortgage debt, and is now permanent. That includes mortgage insurance premiums (MIP) as well, which were previously in limbo.
What is Mortgage Interest Premium (MIP)?
It’s the amount you pay in interest on your home or investment loan. Deducting it reduces your taxable income. Mortgage Insurance Premiums are extra payments often required when putting less than 20% down. These are now deductible like interest, great news for lower down payment buyers
What Is the Mortgage Interest Deduction?
The Mortgage Interest Deduction (MID) allows you to deduct the interest you pay on a mortgage loan from your taxable income, reducing how much you owe in federal income taxes.
It has traditionally been one of the most powerful tax incentives for:
Homeowners
Second-home buyers
Real estate investors (when property is held personally and itemized)
2025 Reform: What Changed?
The One Big Beautiful Bill Act does two key things:
1. Makes the $750,000 Mortgage Interest Cap Permanent
The 2017 tax law lowered the deduction limit from $1M → $750K in mortgage debt
That was set to expire in 2026
Now, the $750,000 cap is permanent and indexed for inflation
This gives long-term certainty for homebuyers and lenders, especially in mid- to high-value markets like Houston suburbs, Austin, or coastal areas.
2. Adds Mortgage Insurance Premiums (MIP) as Deductible Interest
You can now deduct your mortgage insurance (PMI/MIP) as if it were interest
Applies to:
Conventional loans with PMI
FHA loans with MIP
VA and USDA loans (in some cases)
Previously, MIP deductibility had to be renewed yearly — now it’s part of the permanent code.
Example: Tax Savings in Practice
Let’s say you purchase a $600,000 home with 10% down:
Your mortgage is $540,000
Interest rate = 6.5%
First-year interest = ~$35,100
Plus $3,000 in annual MIP (mortgage insurance premiums)
Total deduction = ~$38,100
At a 32% tax bracket, that’s $12,192 in federal tax savings in year one alone.
Multiply that by 5–7 years of high-interest amortization and you’re looking at tens of thousands saved.
What Doesn’t Qualify
Loans over $750K: only interest on the first $750K is deductible
Investment properties held in LLCs or partnerships: MID doesn't apply (instead, you deduct interest on Schedule E, not Schedule A)
Properties with personal + rental use: deductions may need to be apportioned based on use
Must itemize deductions — doesn’t apply if you use the standard deduction
Pair With These for Maximum Leverage
SALT deduction (property taxes): Now expanded to $40K — stack it with MID
First-time buyer credits or baby bond programs (new down payment tools)
Cost segregation (for depreciation on the investment portion)
Bonus depreciation (for equipment and appliances in mixed-use properties)
Strategic Uses of the Mortgage Interest Deduction
1. Encourages Buying vs. Renting
With permanent MID and MIP deductibility, the monthly cost of owning shrinks after taxes, especially in rising-rent markets.
2. Supports Higher Purchase Power
Knowing you’ll deduct interest for years, buyers can justify slightly higher prices or stretch their budget (especially dual-income earners).
3. Helps Sell Homes with Mortgage Assumption
If you’re selling a home with an assumable low-interest FHA or VA loan, the MID + MIP deductibility makes it even more appealing to buyers.
4. Boosts Appeal of STRs and Live-In Flips
For investors who occupy the property for part of the year (e.g., house hackers or live-in flippers), MID applies to your personal-use portion, creating a hybrid tax benefit strategy.
Opportunity Zones (OZs) — Strengthened & Permanent
Opportunity Zones — designated underinvested areas where you can defer or eliminate capital gains taxes are now permanent. Initially created by the 2017 Tax Cuts and Jobs Act, they’re now backed by a long-term framework.
What’s an Opportunity Zone?
An economically distressed area where investors get significant tax breaks for long-term real estate or business investments.
Spur investment in undercapitalized neighborhoods
Encourage job creation and local development
Offer serious tax incentives for private investors
2025 Reform: What’s New & What Got Better
The One Big Beautiful Bill Act (2025) significantly improved and locked in the Opportunity Zone program. Here’s how:
1. OZ Tax Benefits Made Permanent
Previously, most OZ tax benefits were set to expire in 2026
Now, the entire framework is permanent, including:
Capital gains deferral
Step-up in basis
Tax-free exit after 10 years
2. Rural & Redesignated OZs Added
New provisions allow decennial re-designation of zones
Rural areas — which were previously underutilized — can now be added or better supported
This opens up new locations for qualified OZ projects, especially in:
Texas Hill Country
South Texas (Starr, Hidalgo, Willacy counties)
East Texas towns and rural industrial corridors
3. More Flexibility & Accountability
Updated rules clarify what qualifies as a “Qualified Opportunity Zone Business” (QOZB)
More robust compliance standards and reporting reduce bad actors while increasing investor confidence
Expanded timeframes for project development and reinvestment in operating businesses
The 3 Core OZ Tax Benefits (Now Permanent)
Gain Defferal - You can defer capital gains tax on any prior investment (stock, crypto, real estate, etc.) if reinvested in an OZ within 180 days
Step-Up Basis - Partial forgiveness of deferred taxes after 5 or 7 years (this step-up benefit will be modified for newly timed investments)
100% Tax-Free Growth - If you hold your OZ investment for 10+ years, no taxes owed on future capital gains - ever
EXAMPLE:
You sell a rental property and have a $400K capital gain.If you roll that gain into a Qualified Opportunity Fund (QOF) that invests in a commercial building in a Houston Opportunity Zone:
You defer capital gains taxes until 2027 (or longer under new rules)
If you hold for 10 years, your new appreciation is 100% tax-free
E.g., your $400K turns into $1M → You pay no tax on the $600K gain
What Qualifies as an OZ Investment?
To receive the benefits, you must:
Invest capital gains (not ordinary income)
Through a Qualified Opportunity Fund (QOF) — a legal investment vehicle
Into eligible property or businesses in an OZ
Meet certain substantial improvement or original use rules
Follow compliance and timeframes for development or business operations
Strategy Stack: How to Maximize the OZ Play
Pair with cost segregation to front-load depreciation on your OZ project
Use bonus depreciation on qualifying building components or business assets
Partner with LIHTC or other credits to fund affordable housing in OZs
Bundle with 1031: Use OZs for next leg if not rolling entire proceeds via 1031
Map of Texas Opportunity Zones
The 2025 reform adds rural expansion, 10-year hold tax exemptions, and new requirements for accountability. For investors? It means deeper incentives, reduced risk, and more strategic time to deploy capital.
4. Low-Income Housing Tax Credit (LIHTC) Expansion
A 12% increase in LIHTC allocations, plus a cut in bond financing thresholds from 50% to 25%, opens doors to more affordable housing developments.
What is LIHTC?
The Low-Income Housing Tax Credit is a federal program that gives investors and developers tax credits in exchange for building or renovating housing for low-income tenants.
This makes multifamily affordable housing a more profitable and accessible entry point, especially for syndicators and social-impact investors.
LIHTC in Texas: Why This Is a Huge Deal
In Texas, and especially metro areas like Houston, Dallas-Fort Worth, San Antonio, and Austin:
Demand for affordable housing far outpaces supply
Labor and construction costs are rising, making new developments harder to justify without a subsidy
LIHTC bridges the funding gap while delivering long-term community value and strong investor tax outcomes
Houston example: A $15M affordable housing development can now qualify for credits with only ~$3.75M in bond financing (25%) instead of $7.5M, making the capital stack easier to build and the project more likely to happen.
Strategic Stack: Pair LIHTC with These
Opportunity Zones → Stack OZ deferrals with LIHTC credits for double benefit
Historic Tax Credits (HTC) → When rehabbing older buildings
Tax-Exempt Bonds → Lower borrowing costs
Cost Segregation + Bonus Depreciation → For project components not covered by LIHTC
2025 Reform Highlights — What Changed?
The new law makes significant, permanent improvements to the LIHTC program:
1. Permanent Increase in Allocation Authority
The total amount of LIHTC available to states is increased by 12.5%
This gives state housing agencies more credits to allocate to projects, opening doors for more investors to get in
2. Bond Financing Threshold Lowered from 50% to 25%
Previously, projects needed at least 50% of their development costs financed through tax-exempt private activity bonds to access the “4% credit.”
Now, the threshold is just 25%
This dramatically expands the number of projects that qualify — especially in high-construction-cost areas like Houston, Austin, and Dallas
3. Permanent Status
LIHTC was previously subject to political renewal every few years
Now, these enhancements are locked in, giving developers long-term certainty
How LIHTC Works for Investors
You can benefit from LIHTC in two main ways:
1. As a Developer (or Partner in Development)
You apply for LIHTC credits through your state housing agency
You either keep the credits to reduce your own tax liability OR sell them to a tax credit investor (like a bank or fund)
2. As a Tax Credit Investor (Syndicator)
You buy the credits (typically for $0.85–$0.95 per $1 of credit)
You reduce your tax bill dollar-for-dollar over 10 years
You may also receive a share of cash flow and depreciation
For example: If you invest in a LIHTC project offering $1 million in credits, you could buy those credits for $850,000 and receive $100,000 in tax reductions per year for 10 years.
What’s the Return for Investors?
While LIHTC projects don’t offer explosive cash flow, they are:
Tax-advantaged
Low risk
Backed by guaranteed demand (especially in housing-scarce cities)
Often paired with grants, soft loans, or city support
Many institutional investors view LIHTC as a stable, low-volatility hedge in a portfolio, especially in inflationary environments.
Bottom Line
This permanent LIHTC expansion:
Opens the door to more deals
Reduces the capital barriers for developers
Delivers dollar-for-dollar tax reduction for investors
Supports long-term housing stability and economic development
5. SALT Deduction: Quadrupled
The SALT deduction cap (for State and Local Taxes) has increased from $10,000 to $40,000 through 2030. This helps property owners in high-tax states or cities keep more after-tax income.
What’s SALT?
SALT stands for State and Local Taxes, including:
State income taxes
Local income taxes
Property taxes (very relevant to real estate investors)
The SALT deduction allows you to deduct state/local income and property taxes from your federal tax return. The cap had limited deductions for homeowners in places like California, New York, and even parts of Texas and Florida.
Now, joint filers may deduct up to $40,000 in property and income taxes, a game changer for cash flow and portfolio planning.
What Was the Problem?
The 2017 Tax Cuts and Jobs Act capped the SALT deduction at $10,000, regardless of filing status.
This especially hurt:
Joint filers in high-property-value areas (paying $20K+ in property taxes)
High-income investors in states like California or New York
Texans and Floridians with high property taxes but no state income tax (still hit the cap fast)
Even in Texas cities like Houston, Dallas, Austin, and San Antonio, typical investors with duplexes or small portfolios were easily exceeding the $10K cap just on property taxes alone.
2025 Reform: What Changed?
1. SALT Deduction Cap Increased to $40,000
Applies to married couples filing jointly
Indexed for inflation
In effect, from 2025 through 2030
2. "Marriage Penalty" Eliminated
Previously, joint filers were stuck with the same $10K cap as single filers
Now, joint filers can deduct 4X more than they could in 2024
3. Applies to Property Investors, Not Just Homeowners
If you're paying property taxes through your Schedule A (itemized deductions), you benefit
Applies to second homes, rental properties (depending on treatment), and land holdings
Why It Matters for Investors
1. More Tax Shelter for High-Tax Markets
Helps investors buying in Houston suburbs, Dallas-Fort Worth, Austin, Miami, San Diego, NYC, etc.
Makes higher tax areas more attractive again from a cash flow and ROI perspective
2. Boosts Net Income & Lending Power
Higher deductions = lower federal tax bill
Improved after-tax income = better DSCR (Debt Service Coverage Ratio) for financing
3. Encourages Larger Acquisitions or Luxury Portfolios
Investors looking at short-term rentals or luxury units (with high taxes) now benefit again
Reduces penalty for owning multiple high-value properties
Example: Real-World Impact
Let’s say you own:
A primary residence in Friendswood, TX ($9,200 annual property tax)
A duplex in Dallas ($12,600 in property tax)
A vacation rental in Galveston ($11,000 in property tax)
Total Property Tax: $32,800
Under the old SALT cap:
You could only deduct $10,000
You lost out on $22,800 in deductible taxes
Under the new SALT cap:
You can deduct up to $40,000
You now benefit from the entire amount, potentially lowering federal taxable income by $22,800 more
At a 35% tax bracket, that’s an additional $7,980 in tax savings per year
Things to Keep in Mind
Only applies to itemized filers (not standard deduction users)
Some rental property taxes may already be deductible on Schedule E, this applies mainly to non-depreciated properties, second homes, or property held personally
Bill provisions last through 2030, so use this window strategically
Strategy Stack
To maximize the SALT deduction:
Group high-tax assets under personal ownership (if appropriate)
Use professional tax planning to coordinate Schedule A + Schedule E
Explore trust or entity structures that optimize deduction access
Pair with:
Bonus depreciation for Schedule E gains
Cost segregation studies for larger commercial/residential assets
LIHTC or OZ investments to offset high tax years
6. Baby Bonds — A Head Start for Homeownership
Every child born after July 4, 2025, receives a $1,000 federally funded investment account. Families can contribute up to $5,000/year, and funds grow tax-free.
What are Baby Bonds?
Tax-free savings accounts created at birth to help cover education or a down payment. By age 18, even modest contributions could grow to $166,000 with compound interest.
Up to 50% of funds can be used for a home down payment at age 18–25, and 100% thereafter. This is a long-term pipeline for future buyers.
7. 1031 Like-Kind Exchanges — Protected
Despite discussions of cuts, the law leaves 1031 exchanges fully intact.
What is a 1031 exchange?
A tax strategy that lets you sell a property and reinvest the profits into another "like-kind" property, without paying capital gains taxes immediately.
This is a cornerstone of long-term portfolio growth for real estate investors. You can keep upgrading properties without the tax hit.
8. Carried Interest — No Changes
Efforts to change how carried interest is taxed were shut down.
What’s carried interest?
Carried interest is a share of profits a general partner (GP) or fund manager receives for managing a real estate investment deal, often without investing much capital themselves.
Think of it like this:
You're the one putting in the expertise, managing the property, raising investor funds, and creating the upside. In return, you get a percentage of the profits, usually 20–30%, after investors get their preferred return.
Example:
Let’s say you raise $10M for a development project.
Your investors get a 7% preferred return.
After that, you (as the GP) earn 25% of the remaining profits.
That 25% is your carried interest.
How Is Carried Interest Taxed?
Currently, carried interest is taxed at the long-term capital gains rate (15–20% for most people), not ordinary income rates (which can go up to 37%).
This is huge — it allows you to keep more of your upside and reduces the tax hit from your "sweat equity."
Strategy Tip
If you're raising capital or doing JV deals, structure your carried interest using:
Preferred return waterfall structures
Operating agreements that clearly define profit-sharing
Hold periods of 3+ years, which help qualify as long-term gains
Holding for less than 3 years could trigger short-term gains, so structure wisely.
Although carried interest is safe for now, it’s frequently in the political crosshairs. It’s wise to:
Lock in long-term deals in 2025–2026
Be conservative in projecting after-tax profits
Consider converting carried interest into equity ownership where it makes strategic sense
Combine with Other Benefits!
Carried interest gets even more powerful when stacked with:
1031 exchanges (keep rolling gains forward)
Bonus depreciation (lower overall taxable income)
Opportunity Zones (eliminate capital gains altogether after 10 years)
The One Big Beautiful Bill Act did not include any reform or removal of the carried interest treatment, a significant win for real estate professionals.
This preserves the capital gains tax treatment on your performance-based profit share, making it easier to scale, syndicate, and attract talent to your projects.
9. Bonus Depreciation & Industrial Expensing
Investors and developers can immediately deduct 100% of asset costs like HVAC, equipment, and certain building improvements through bonus depreciation.
What is bonus depreciation?
Bonus depreciation is a tax incentive that lets you deduct the full cost of a qualified asset in the same year it's placed in service, rather than spreading that deduction over its useful life (like 5, 7, or 15 years).
For Example:
If you buy $100,000 worth of new HVAC systems or equipment for a multifamily building, you can deduct all $100K in year one under bonus depreciation, rather than slowly depreciating it over 15–27.5 years.
What Qualifies?
Eligible assets generally include:
HVAC systems
Appliances
Fixtures
Equipment
Landscaping tools
Roofing improvements
Certain leasehold/building improvements
Industrial structures used in manufacturing, agriculture, etc.
This creates major tax advantages for developers building industrial campuses or upgrading warehouses in Opportunity Zones or emerging logistics corridors.
10. Estate & Gift Tax Exemption Locked at $15M
The estate tax exemption remains high: $15 million per person, indexed for inflation. That helps preserve generational wealth.
What is the estate tax exemption?
The amount of wealth you can pass to heirs tax-free. This helps real estate families and trust fund planners pass down property without triggering major tax bills. tax bills.
A New Chapter or More of the Same?
Whether you're a homeowner, investor, developer, or simply trying to understand what these sweeping changes could mean for your future, one thing is clear: the "One Big Beautiful Bill" is a major turning point for U.S. tax and housing policy. From locking in popular deductions to expanding opportunities for generational wealth and affordable housing, it opens doors, especially for those who understand how to walk through them.
That said, this blog is not financial, legal, or tax advice. I'm not an expert, just someone trying to make sense of a complex moment in our economy and political landscape. Before you make any moves, talk to a licensed tax professional, CPA, or attorney. Laws may change. Interpretations may vary. And what works for one person or business might not work for another.
What I hope is that this gave you something to think about, not fear, not hype, just clarity. So you can be prepared, proactive, and positioned to win in any market.
And when you’re ready to make real estate moves, whether you're buying, selling, investing, or planning your next project in Texas, I’d love to be in your corner. I love being a realtor, and I enjoy helping people like you turn big ideas into smart real estate plays. Let’s build something that lasts.
Stay sharp, stay informed, and take care of your future.
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