With tax reform back in the spotlight, many real estate investors are paying close attention to the recently proposed “One Big Beautiful Bill Act.” While the name may raise eyebrows, the bill itself contains several serious proposals that, if passed, could reshape how multifamily investments are taxed, financed, and valued.
As a passive investor, you don’t need to read every page of the legislation. But it’s important to understand how some of the bill’s key provisions might affect your returns, tax liability, and long-term strategy. Here’s what stands out.
1. The Return of 100% Bonus Depreciation
One of the most significant changes in the bill is the proposed restoration of 100% bonus depreciation for qualifying property.
Why it matters:
Bonus depreciation allows multifamily operators to deduct a large portion of a property’s value in the first year. For passive investors, this often results in a large “paper loss” on the K-1—one that can be used to offset taxable income from other sources, depending on your individual tax situation.
Investor Impact:
- Greater upfront tax advantages in the first year of ownership
- Improved after-tax cash-on-cash returns
- Stronger tax sheltering for high-income investors
At Blue Lake Capital, we’ve always considered depreciation a core component of total return, not a footnote. This provision, if passed, reinforces that philosophy.
2. Expanded QBI Deduction: More of What You Keep
The bill proposes increasing the Qualified Business Income (QBI) deduction from 20% to 23% for pass-through entities.
Why it matters:
Many of our investors participate in deals structured as LLCs or LPs, both pass-through entities. Increasing the QBI deduction reduces the effective tax rate on those earnings.
Investor Impact:
- Slight increase in net return without changing risk profile
- More favorable tax treatment across multiple deals or funds
- Potentially greater appeal of multifamily compared to traditional equities
For high-income earners and those investing at scale, small improvements in tax efficiency can have compounding benefits.
3. Opportunity Zone Program Gets Extended
The bill would extend the Opportunity Zone (OZ) program through 2033 and refine eligible zones to focus on communities with persistent poverty or declining populations.
Why it matters:
OZs allow investors to defer and reduce capital gains taxes by investing in designated underserved areas. While we haven’t led OZ deals at Blue Lake, we’ve evaluated several and continue to monitor the space.
Investor Impact (if applicable):
- Longer runway for OZ-based strategies
- More time to deploy capital gains into tax-advantaged vehicles
- Stronger alignment between social impact and economic return
In an environment where tax-advantaged investing is becoming harder to find, the OZ extension creates optionality.
4. Section 179 Expensing Becomes More Powerful
Section 179 allows businesses to deduct the full cost of certain equipment and property improvements. The proposed changes raise the cap to $2.5 million in deductions per year, with a phase-out threshold of $4 million.
Why it matters:
While this deduction applies more directly to sponsors, it affects how we manage and improve the assets you’re invested in. Accelerated write-offs can lower taxable income at the entity level, keeping more cash available for distributions or reinvestment.
Investor Impact (if applicable):
- Greater financial flexibility at the property level
- Improved property-level NOI (and thus, valuation)
- Potential for better cash flow and reinvestment outcomes
It’s a back-end benefit that drives front-end performance.
5. SALT Deduction Cap Increase Offers Relief in High-Tax States
The bill proposes lifting the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for households earning less than $500K.
Why it matters:
For investors living in California, New York, or similar high-tax states, the current SALT cap has limited how much state tax you can deduct on your federal return. Raising the cap means more after-tax income, which in turn provides additional capital that can be redirected into future investments.
Investor Impact (if applicable):
- Improved personal tax situation for many accredited investors
- Increased ability to allocate capital toward private real estate
- Enhances overall financial flexibility for long-term wealth planning
We often talk about compounding wealth through multifamily, but reducing unnecessary tax drag is just as important.
Where Caution is Warranted
While the proposed bill introduces several investor-friendly tax benefits, it also carries broader economic implications that deserve close attention, with one in particular:
Potential for Rising Interest Rates
The bill is expected to increase the federal deficit significantly, which could put upward pressure on long-term interest rates. For real estate, higher borrowing costs can impact both acquisition pricing and refinancing strategies. Even for stabilized assets, increased rates can affect exit cap rates and overall investor returns.
For passive investors, this reinforces the importance of partnering with operators who underwrite conservatively and maintain flexibility in deal structures. Navigating a higher-rate environment requires not just reactive adjustments, but proactive planning from day one.
Final Thoughts: Opportunity Lies in Preparation
Legislation doesn’t control the success of a multifamily investment, but smart operators and informed investors know how to position themselves for any policy environment. The proposed “Big Beautiful Bill” reintroduces familiar tax tools that reward active deployment of capital, long-term holding strategies, and asset-level optimization.
If passed, the bill could offer meaningful upside for passive investors, especially those looking to increase after-tax returns in a high-rate environment.
We’ll continue to monitor this legislation as it moves through the Senate and share specific updates on how it could influence upcoming offerings.
In the meantime, if you’re considering reinvesting capital gains or increasing your allocation to tax-efficient real estate, now may be the time to explore your options.
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About Ellie Perlman
Ellie Perlman is the founder and CEO of Blue Lake Capital, a woman owned multifamily real estate investment firm focused on partnering with family offices and accredited investors to build and preserve generational wealth. Since its founding in 2017, Blue Lake has successfully acquired and operated multifamily assets across high-growth U.S. markets, completing $1B+ in transactions.
At Blue Lake Capital, Ellie and her team work exclusively with family offices and accredited investors, offering carefully curated investment opportunities that emphasize long-term wealth creation, stability, and risk-adjusted returns. A defining aspect of Blue Lake’s investment strategy is its integration of advanced AI-driven analytics and data science into the entire lifecycle of acquisitions and asset management. By leveraging cutting-edge technology, the firm executes data-driven forecasting on market trends, asset performance, and tenant behavior, ensuring strategic decision-making and optimized returns.
In addition to leading Blue Lake Capital, Ellie is the original founder and host of "REady2Scale - Real Estate Investing" podcast, which provides insights into multifamily real estate, alternative investments, and finance.
Ellie began her career as a commercial real estate attorney, structuring and negotiating complex transactions for one of Israel’s leading development firms. She later transitioned into property management, overseeing over $100M in assets for Israel’s largest energy company.
Ellie holds a Master’s in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can learn more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.
*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.
