What Real Estate Investors and Retirement Savers Should Know About the New Tax Bill

On July 4, 2025, President Donald Trump signed into law the “One Big Beautiful Bill Act,” a sweeping piece of legislation that marks a significant overhaul of the U.S. tax code and federal spending priorities. This 870-page bill, passed narrowly in both the House and Senate, enacts permanent extensions of many provisions from the 2017 Tax Cuts and Jobs Act, introduces new tax deductions, and implements substantial cuts to social welfare programs.

Key features of the bill include:

• Permanent tax cuts: The legislation makes permanent the tax cuts initially set to expire in 2025, including reductions in individual and corporate tax rates.
• New deductions: Introduces deductions such as $12,500 for overtime, $25,000 for tips, and $10,000 for U.S.-assembled car loans.
• Increased standard deduction and child tax credit: The standard deduction is increased, and the child tax credit is raised to $2,200.
• Social program cuts: The bill enacts nearly $930 billion in cuts to Medicaid, introduces work requirements for recipients, and reduces funding for food assistance programs like SNAP by $186 billion.
• Defense and border security spending: Allocates significant funding increases for defense and border security initiatives.

The Congressional Budget Office estimates that the bill will add approximately $3.4 trillion to the federal deficit over the next decade.

Changes for real estate and retirement investors

Real estate investors and those saving for retirement have reasons to pay attention to this legislation. In a recent webinar, tax attorney John Hyre provided an insightful overview, highlighting provisions most relevant to these groups. Here are some of the key points, including how these provisions may impact your financial strategies.

Qualified Business Income (QBI) deduction: Now permanent

“This is probably the most important single deduction for businesses,” Hyre emphasized. Previously temporary, the Qualified Business Income (QBI) deduction is now permanent, allowing business owners—including most real estate and lending activities—to deduct up to 20% of their net business income. This deduction significantly reduces taxable income, leading to substantial tax savings.

Bonus depreciation boosted to 100%

One advantage Hyre highlighted is that bonus depreciation has been restored to 100%, meaning businesses can immediately deduct the full cost of eligible tangible personal property—items like furniture, equipment, and even landscaping—rather than spreading deductions over several years.

For real estate investors, cost segregation can be especially attractive. By reclassifying parts of a building as tangible personal property, investors can rapidly accelerate their depreciation deductions, greatly reducing their tax burden upfront.

Expanded Section 179: Targeted deductions enhanced

Hyre refers to Internal Revenue Code Section 179 as “sniper depreciation” because it allows businesses to precisely target specific assets for immediate deduction, unlike bonus depreciation, which requires grouping assets together. The bill increases the annual Section 179 deduction limit up to $2.5 million, providing investors greater flexibility in strategically reducing their tax liability.

Higher standard deduction

The standard deduction is also increased significantly under the new bill. This means many taxpayers, especially those without substantial itemizable deductions, can reduce their taxable income without the complexity of itemizing deductions, simplifying tax filing for millions.

Lending businesses clarified as a trade or business

One critical clarification Hyre discussed regards private lending. Under the new law, lending activities can clearly qualify as a “trade or business.” This matters because businesses have access to numerous deductions that “mere investments” do not, including the QBI deduction.

Hyre noted that prior uncertainty often left lenders missing out on valuable deductions. Under this new law, he said lenders may classify their lending as a business. He described the scenario as “win-win,” particularly emphasizing its importance for investors who use self-directed IRAs or 401(k)s for private lending.

These investors can structure their lending operations to fully benefit from available deductions, significantly lowering their tax liability and improving their financial outcomes.

Charitable contributions

Hyre recommended careful consideration when donating to charity. Contributions made directly by businesses reduce your QBI deduction, but giving personally does not.

“If you pay charity through the business, it harms your QBI,” he explained. “If you pay it personally, it does not.”

Alternatively, expenses traditionally seen as charitable donations—like sponsoring a little league team—might better be classified as advertising to maintain business deductions without negatively affecting your QBI.

Retirement account lending clarifications

When you use retirement accounts—such as IRAs or 401(k)s—for alternative investments like private lending, certain types of investment income can sometimes trigger an unexpected tax known as Unrelated Business Income Tax (UBIT). This tax is typically levied on income that results from operating a business within the retirement account itself.

During the recent webinar, John Hyre specifically addressed this concern to reassure retirement savers: “Interest income, even if it’s a trade or business, is never UBIT taxable in an IRA or 401(k) unless you’re borrowing to lend interest income,” he explained.

In simpler terms, this means if you’re using funds directly from your retirement account to lend to others—such as providing mortgages or private loans—the interest payments you receive are generally safe from UBIT, helping to maintain the account’s tax-advantaged status.

However, Hyre also clarified an important exception: if your retirement account itself borrows money (often referred to as using leverage) to make these loans, then any income attributable to that borrowed money would be subject to UBIT.

Limitations for specified service businesses remain

However, Hyre noted the new bill does not help professionals such as doctors, lawyers, and consultants earning high incomes, as they still face limits on the QBI deduction once they exceed certain thresholds.

“Unfortunately,” he said, “if you’re in one of these professions and you make ‘too much,’ you’re still hosed on this.”

Final thoughts

Overall, the “One Big, Beautiful Bill” brings significant and permanent tax benefits, strongly encouraging investment and economic growth. Real estate investors and retirement savers, particularly those utilizing self-directed accounts, may find many benefits from the new legislation.

Get more insights from John Hyre’s extensive analysis of the OBBB: Sign up to access the entire recording, plus a bonus FAQ session.

John Hyre is not an affiliate of Equity Trust Company. Opinions or ideas expressed by John Hyre are not those of Equity Trust Company nor do they reflect their views or endorsement. This material is for educational purposes only, and should not be construed as tax, legal, or investment advice. Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Investing involves risk, including possible loss of principal. Whenever making an investment decision, please consult with your tax attorney or financial professional.