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.
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:
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.
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:
For high-income earners and those investing at scale, small improvements in tax efficiency can have compounding benefits.
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):
In an environment where tax-advantaged investing is becoming harder to find, the OZ extension creates optionality.
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):
It’s a back-end benefit that drives front-end performance.
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):
We often talk about compounding wealth through multifamily, but reducing unnecessary tax drag is just as important.
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.
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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