Diane Kennedy, CPA
2 min read
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The One Big Beautiful Bill restores 100% bonus depreciation, updates Opportunity Zones, and makes the QBI deduction permanent. The biggest opportunity isn't simply claiming deductions—it's using them strategically to support long-term investment decisions.
If you've been following tax news lately, you've probably heard a lot about the One Big Beautiful Bill (OBBB). While the legislation affects many industries, several of its provisions are particularly important for real estate investors.
The headlines have focused on restored bonus depreciation, changes to Opportunity Zones, and making the Qualified Business Income (QBI) deduction permanent.
Those are certainly important changes. But as a tax strategist, I think the bigger story isn't about new tax breaks. It's about making better investment decisions.
When Congress changes the tax law, most real estate investors immediately ask one question: “How much can I deduct?”
That's a reasonable question, but it isn't always the right one.
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Take Quiz1. Bonus Depreciation Is Back—But Bigger Isn't Always Better
One of the most celebrated provisions in OBBB is the return of 100% bonus depreciation.
Bonus depreciation generally allows qualifying property with a recovery period of 20 years or less to be deducted immediately rather than depreciated over several years. Prior to OBBB, bonus depreciation had been scheduled to drop to 40% for property placed in service during 2026.
The new law restores a 100% immediate deduction and, in most cases, it applies automatically unless you elect out.
For many investors, that's excellent news.
But before you rush to claim every available deduction, remember one important principle:
Just because you can doesn't mean you should.
One client recently completed improvements on a single-family rental.
Some of those improvements qualified for bonus depreciation.
Repaving the driveway was 15-year property.
New kitchen appliances were 5-year property.
Replacing the roof, however, remained part of the building and is depreciated over 27.5 years.
At first glance, taking 100% bonus depreciation on the driveway and appliances seemed like the obvious answer.
It wasn't.
The additional deduction would have created a passive loss that the client couldn't currently use. Instead, it would have been suspended and carried forward, possibly for years.
After reviewing the client's overall tax picture, the better strategy was to elect out of bonus depreciation and recover those deductions gradually through regular depreciation.
The immediate deduction looked attractive. The long-term tax strategy was even better.
Bonus depreciation is a powerful planning tool. The key is using it when it actually improves your tax position, not simply because it's available.
2. Opportunity Zones Reward Good Investments, Not Bad Ones
One of the lesser-known but potentially powerful provisions affected by OBBB involves Opportunity Zones.
Opportunity Zones were originally created to encourage investment in economically distressed communities. Rather than simply offering a tax credit, Congress designed the program to encourage long-term investment in areas that needed redevelopment and economic growth.
The program is built around capital gains.
Suppose you sell a business, investment real estate, or a stock portfolio and realize a significant capital gain. Normally, that gain creates an immediate tax bill.
Instead of paying tax right away, you may be able to invest all or part of that gain into a Qualified Opportunity Fund (QOF). A Qualified Opportunity Fund invests in businesses or real estate projects located within designated Opportunity Zones.
If all of the IRS requirements are met, including strict investment and timing rules, you may be able to defer or even legally avoid paying tax on your original gain. If you continue to hold the Opportunity Zone investment long enough, you may also receive valuable tax benefits on the appreciation of that new investment.
The original Opportunity Zone program was beginning to lose momentum because investors were approaching the end of the original deferral period.
The One Big Beautiful Bill changes that.
Rather than allowing the program to wind down, OBBB creates a permanent framework with a new generation of designated Opportunity Zones, a rolling deferral period for qualifying investments, and continued incentives for investors willing to make long-term investments in these communities.
Those tax benefits can be substantial.
But here's the lesson I want every investor to remember: A tax incentive should never be the reason you make an investment.
I think of two very different investors.
The first sold a business and recognized approximately $1 million of capital gain.
He heard about Opportunity Zones and invested in someone else's fund.
The sales pitch focused heavily on the tax savings. The promoter earned substantial fees, the project was poorly managed, and the investment ultimately lost most of its value.
Did he save taxes? Yes.
Did he build wealth? Unfortunately, no.
Saving taxes on a poor investment is still a poor financial outcome.
Now compare that with another family I'm currently advising.
They expect to recognize an eight-figure capital gain from the sale of their business. Unlike the first investor, they aren't searching for someone else's Opportunity Zone project.
Real estate development is already what they do.
Because of the changes under OBBB, they're evaluating whether creating their own Qualified Opportunity Fund makes sense. Rather than investing in a project they don't understand, they would invest in developments they already know how to build and manage.
If properly structured and all IRS requirements are satisfied, the Opportunity Zone rules could significantly reduce the tax cost of selling the business while also creating valuable long-term tax benefits on the future appreciation of those developments.
Notice the difference.
The tax benefits didn't make this investment attractive.
The investment was already attractive because it fit the family's expertise. The tax law simply makes a good investment even better.
That's the difference between tax planning and tax chasing.
3. The Hidden Cost of Uncertainty
One of the phrases you'll often hear tax professionals use is "under current law." We say it because tax law is constantly evolving.
Congress can change the law. The Treasury Department can issue regulations that interpret the law differently than anyone expected. Courts can decide cases that reshape how existing law applies.
That's simply part of the day-to-day work of being a tax strategist.
What's much harder is trying to build long-term strategies around tax provisions that are about to expire.
Imagine sitting down with your tax advisor to map out a five-year business plan only to hear: "This strategy works today. But if Congress doesn't act before year-end, we'll have to rethink everything."
That's been the reality for many tax professionals over the past several years.
Temporary tax provisions create uncertainty. They make it harder for business owners to decide whether to invest in equipment, expand operations, hire employees, or acquire additional real estate because no one knows what the rules will look like next year.
One of the most significant changes under OBBB wasn't creating a brand-new deduction.
It was making many existing provisions permanent, including the Qualified Business Income (QBI) deduction.
For many business owners, it may feel like nothing has changed. You'll continue claiming a deduction you've become accustomed to seeing on your tax return.
But behind the scenes, permanence changes everything.
It allows tax professionals to build strategies that extend beyond December 31. Instead of planning around another expiration date, we can focus on helping clients make better long-term business decisions.
Permanent provisions don't just preserve tax deductions. They make long-term tax planning possible.
The Bottom Line
OBBB gives real estate investors some valuable opportunities.
The return of 100% bonus depreciation creates flexibility.
The renewed Opportunity Zone program opens new planning possibilities.
Permanent provisions like QBI allow both investors and advisors to think beyond the next filing season.
But the biggest tax savings rarely come from claiming every deduction available. They come from applying the right deduction at the right time, to the right investment, as part of a thoughtful long-term strategy.
Tax law creates opportunities. Tax strategy helps you decide which ones are worth pursuing.
Frequently Asked Questions
Does the One Big Beautiful Bill restore 100% bonus depreciation?
Yes. OBBB restores 100% bonus depreciation for qualifying property placed in service after the applicable effective date under the new law. In most cases, qualifying property with a recovery period of 20 years or less may be eligible for an immediate deduction rather than being depreciated over several years.
Should every real estate investor claim 100% bonus depreciation?
Not necessarily. While bonus depreciation can significantly reduce taxable income, it isn't always the best planning strategy. If the deduction creates passive losses that cannot currently be used, it may make more sense to elect out of bonus depreciation and recover the deduction over time. The right answer depends on your overall tax situation.
What is an Opportunity Zone?
An Opportunity Zone is a designated economically distressed community where Congress has created tax incentives to encourage long-term investment. Investors who reinvest eligible capital gains into a Qualified Opportunity Fund (QOF) may qualify for tax benefits if they meet the program's requirements.
What is a Qualified Opportunity Fund (QOF)?
A Qualified Opportunity Fund is an investment vehicle that invests in qualifying businesses or real estate located within Opportunity Zones.
Some investors participate in professionally managed funds, while others may establish their own fund when appropriate and with experienced legal and tax guidance.
Are Opportunity Zones a good investment?
The tax benefits can be valuable, but they should never be the primary reason to invest. As with any investment, success depends on the quality of the project, the experience of the management team, and the underlying economics. A tax incentive can enhance a good investment, but it won't rescue a bad one.
What changed for Opportunity Zones under OBBB?
OBBB provides a permanent framework for the Opportunity Zone program, including a new cycle of designated Opportunity Zones and updated rules for qualifying investments. These changes provide greater certainty for investors considering long-term development projects.
What is the Qualified Business Income (QBI) deduction?
The Qualified Business Income deduction allows many eligible owners of pass-through businesses, including many real estate businesses, to deduct up to 20% of qualified business income, subject to various limitations and requirements.
Why is making the QBI deduction permanent important?
Permanent tax provisions provide certainty. Instead of planning around deductions that may expire every few years, business owners and their advisors can make longer-term investment and business decisions with greater confidence.
How can real estate investors maximize tax savings under OBBB?
The biggest tax savings rarely come from simply claiming every available deduction. They come from coordinating depreciation, capital gains planning, entity structure, passive activity rules, and long-term investment decisions as part of a comprehensive tax strategy.
Lettuce helps self-employed professionals and business owners automate bookkeeping, payroll, tax compliance, and S Corp administration so they can make smarter long-term tax decisions with confidence. If you're looking to maximize tax efficiency while staying compliant, try Lettuce and get started today!
This article is part of the Tax Strategy Series, featuring in-depth, practical guidance from Diane Kennedy, CPA—bestselling author, strategic tax consultant, and founder of USTaxAid and KennedyTax.tax. Explore the full series and catch every installment here.