July 10, 2025
2025 Tax Law Changes: What They Mean for Your Rentals (OB3)
With the One Big Beautiful Bill Act (OB3) now signed into law, many landlords are asking:
What does this change for my rentals, my tax deductions, and my depreciation strategy?
The short answer: Some provisions have been extended, some clarified — and a lot of headlines floating around don’t apply to landlords the way you might think.
At Fortitude Tax & Accounting, we help landlords understand these changes without jargon—so you can make smarter, more profitable decisions with your rentals.
What OB3 Actually Changed (That Matters to Landlords)
✅ Qualified Business Income (QBI) Deduction Extended
The 20% Qualified Business Income (QBI) deduction for pass-through businesses (S Corps, sole proprietors, partnerships) was originally set to expire after 2025. OB3 extended this deduction and made key elements permanent.
For landlords, this matters if:
- You qualify as a trade or business under IRS safe harbor rules, material participation standards, or because you’re a Real Estate Professional (RE Pro).
- You’re actively managing your rentals — not just holding property passively.
Why it matters:
If you’ve been taking the QBI deduction, you can continue doing so. If you’re structured correctly, this remains a core piece of your tax strategy — without a looming sunset date.
✅ Interest Deduction Changes (Good News for Debt-Financed Real Estate)
OB3 rolled back some of the more restrictive limitations on deducting business interest expense — a big win for larger investors who use financing as a growth tool.
Why this matters:
Under prior rules, highly leveraged investors often couldn’t deduct all of their mortgage interest on investment properties. OB3 restores flexibility, allowing more interest expense to be deducted. This means:
✔️ Better cash flow
✔️ Improved ROI
✔️ More accurate tax planning for leveraged acquisitions
This is especially impactful for investors pursuing long-term acquisition and growth strategies.
What OB3 Didn’t Change (That’s Often Misunderstood)
❌ 100% Bonus Depreciation & Rentals: Still Limited
You may have heard, “100% bonus depreciation made permanent!” — True for some industries, but not for landlords in the way it’s often assumed.
Clarifying the facts:
- 100% bonus depreciation applies only to assets with a recovery period of 20 years or less.
- Buildings (27.5 or 39 years) remain excluded.
- Effective January 20, 2025, 100% bonus is restored for qualifying property (via cost segregation) under OB3.
Bonus depreciation still applies to:
✔️ Appliances
✔️ Flooring
✔️ HVAC units
✔️ Land improvements (via cost segregation)
These assets remain eligible — but only if they meet the under-20-year rule. The building itself never qualifies.
No Changes to Core Rental Property Rules
- Material participation rules remain unchanged.
- Real Estate Professional (RE Pro) status requirements remain unchanged.
- Residential buildings remain on 27.5-year depreciation schedules.
- Passive activity loss limitations still apply.
What This Means for Active Landlords & Real Estate Professionals
Cost Segregation Remains Valuable (Even as Bonus Depreciation Phases Back In)
For active landlords and RE Pros:
- Cost segregation remains a key tool to unlock deductions on short-life property, as outlined in the IRS cost segregation audit techniques guide.
- Bonus depreciation offers acceleration, now back to 100% (effective 1/20/2025).
- Timing matters more than ever — aligning acquisitions and improvements with bonus opportunities is key.
For passive landlords:
- These changes offer less direct benefit.
- Bonus depreciation and QBI only apply if you qualify.
- Without RE Pro status or material participation, losses remain limited to passive income.
The Bottom Line for Landlords
OB3 did bring some wins, but it didn’t change the fundamentals for rental properties.
What matters most hasn’t changed:
✅ Clean records
✅ Smart planning
✅ Proper classification of repairs vs. improvements
✅ A proactive tax strategy tied to your long-term goals
How Fortitude Helps Landlords Stay Ahead
At Fortitude Tax & Accounting, we help rental property owners:
✅ Understand how tax law changes affect their properties
✅ Optimize depreciation strategies (bonus, cost segregation, safe harbors)
✅ Maximize QBI and other deductions where eligible
✅ Build audit-ready records and smart, forward-looking tax strategies
Uncertain how these updates impact you? Let’s talk. We’ll make sure you’re clear, compliant, and taking advantage of every opportunity that still exists.
👉 Schedule a consultation today.
Related Articles in This Series:
- Rental Property Tracking: Strategies Landlords Can’t Afford to Miss
- Repairs vs. Improvements: How Landlords Can Maximize Deductions in 2025
- Active vs. Passive Rental Income: How It Impacts Your Taxes (and Your Deductions)
Frequently Asked Questions
Is 100% bonus depreciation still available for my rentals?
Yes — for qualifying short-life property (appliances, flooring, HVAC, land improvements) starting again at 100% after January 20, 2025. Buildings are excluded.
Can I still claim QBI on my rentals?
If you qualify under IRS rules (safe harbor, RE Pro), yes. OB3 extended this deduction.
Should I still consider cost segregation?
Absolutely. Cost segregation continues to unlock faster deductions on qualifying assets.
Does this impact my buildings or just improvements?
Only short-life property (under 20 years) is impacted. Buildings stay on 27.5-year schedules.
Can Fortitude help me plan around these changes?
Yes — we help landlords develop proactive strategies for depreciation, QBI, and all relevant tax laws.
Fortitude Tax & Accounting, located in Stansbury Park, Utah, just outside the Greater Salt Lake City area, specializes in proactive tax savings and accounting services tailored for therapists, real estate professionals, and small business owners. Led by Melissa Calwell, CPA, EA, with over 30 years of hands-on experience in both the private sector and public accounting, our firm offers comprehensive services including tax planning, tax preparation, bookkeeping, payroll, and tax strategies designed to maximize your savings. Choosing Fortitude Tax & Accounting means partnering with a firm committed to helping you achieve financial success through expert guidance and personalized service. Contact us today to learn how we can work together to optimize your financial future.
Fortitude Tax & Accounting has provided this article for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post and their personal situation.
