While everyone is focused on President Trump’s tariffs, the clock is ticking on one of the most significant tax reforms in recent history. Many provisions of the Tax Cuts & Jobs Act (TCJA) of 2017 are set to expire at the end of 2025, and real estate investors need to prepare for potential changes that could substantially impact their investment strategies and bottom line.
As an attorney who’s navigated multiple state and federal tax law changes while building a real estate portfolio, I’ve learned that anticipating these shifts isn’t just about defense—it’s about positioning yourself now to make moves and capitalize on new opportunities. Let’s break down what’s potentially coming and how you can prepare.
The SALT Deduction Cap Could Disappear
One of the most controversial aspects of the TCJA was the $10,000 cap on state and local tax (SALT) deductions. For investors in high-tax states like California, New York, and New Jersey, this limitation has been particularly painful.
If the TCJA expires, this cap would lift, potentially making investment properties in high-tax locations more attractive again. Real estate investors focused on lower-tax states might want to reassess whether opportunities in previously avoided markets will become worthwhile again. The math simply works differently when you can fully deduct property taxes on your federal return.
Mortgage Interest Deduction Limits Will Change
The TCJA reduced the mortgage interest deduction limit from $1 million to $750,000 for new mortgages. If these provisions expire, we’ll return to the higher $1 million cap.
For investors financing large properties or in high-cost markets, this change could make leveraging these higher-end properties more tax-efficient. It might be worth holding off on certain financing decisions until there is clarity on whether these provisions will be extended or allowed to expire.
The Pass-Through Business Deduction Could Vanish
Perhaps the most significant impact for real estate investors is the potential loss of the Section 199A deduction, which currently allows qualifying pass-through business owners (including many real estate investors using LLCs, S-Corps, and partnerships) to deduct up to 20% of their qualified business income.
The expiration of this provision would effectively raise taxes for many real estate investors by removing a substantial deduction. For an investor earning $100,000 in income, losing this deduction could mean paying taxes on an additional $20,000 of income.
I’ve been modeling both scenarios in tax planning with my CPA—one where the deduction continues and one where it disappears—to ensure I’m prepared either way. Some investors are accelerating income into tax years before the expiration, while others are setting up more sophisticated structures to mitigate the impact.
Depreciation Recapture Strategy Will Need Reevaluation
The TCJA maintained the 25% maximum rate on depreciation recapture for real estate, but in a post-TCJA world, the interplay between ordinary income rates and capital gains rates could shift significantly.
With potential changes to both income tax brackets and capital gains rates, the calculation around when to sell properties and how to handle potential depreciation recapture will need careful reconsideration.
I’ve had clients accelerate their 1031 exchange plans to lock in the current tax treatment, especially those who were planning exits in the next three to five years anyway.
Estate Planning Considerations Will Change
The TCJA dramatically increased the estate tax exemption to around $14 million per individual ($23 million+ for married couples). This expanded exemption expires at the end of 2025, potentially reverting an exemption roughly half the size.
For real estate investors with substantial portfolios, this could significantly impact estate planning. Some of my older clients are considering gifting properties to heirs now, while exemptions remain high, or restructuring ownership through family limited partnerships or other advanced planning strategies.
Four Things Strategic Investors Are Doing Now
Forward-thinking investors aren’t waiting until December 2025 to adjust their strategies. Trust me, your attorney and CPA won’t be able to handle all the last-minute requests that will come in.
Here’s what I’m seeing among the most strategic players:
- Accelerating depreciation claims through cost segregation studies while rates remain favorable.
- Reassessing entity structures to determine if current pass-through arrangements will still make sense post-2025.
- Planning major transactions with an eye on the 2025 deadline, particularly for sales that might trigger substantial depreciation recapture.
- Consulting with tax professionals who specialize in real estate investing to develop personalized transition strategies.
Final Thoughts
While there’s still uncertainty about which provisions Congress might extend and which will be allowed to expire, proactive investors are preparing for multiple scenarios. The worst position to be in is caught flat-footed when tax laws change.
I recommend developing a relationship now with attorneys and CPAs who deeply understand real estate investing. They can help you model the impact of these potential changes on your specific portfolio. The cost of this advice will likely be far less than the tax impact of making uninformed decisions.
Remember that tax law changes create both challenges and opportunities. Those who understand the implications and position themselves accordingly will find ways to thrive, regardless of how the political winds blow.
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