The real estate industry is closely watching the evolving tax landscape as Congress attempts to push forward a sweeping fiscal year 2025 budget resolution that could lead to significant tax changes.
With the House narrowly passing a resolution which includes the potential for $4.5 trillion in tax cuts over the next decade, real estate firms must evaluate the potential implications on their operations, investments and financial strategies.
Key tax policy developments
The House’s budget resolution, passed on Feb. 25 by a 217-215 vote, aligns with President Trump’s call for a single, comprehensive reconciliation bill that bundles all tax and spending measures. Meanwhile, the Senate has taken a more segmented approach; its version of the budget resolution focusing primarily on border security, energy and defense while leaving tax policy for a later measure. If House Republicans succeed in their approach, tax legislation, including extensions of key Tax Cuts and Jobs Act (TCJA) provisions, could advance more swiftly than anticipated.
One of the most relevant provisions for real estate investors and developers is Trump’s push to reinstate 100% bonus depreciation, retroactive to his inauguration on Jan. 20, 2025.
Initially a hallmark of the TCJA, this provision allowed businesses to immediately deduct the full cost of qualifying property investments, providing a significant cash flow benefit. The phaseout of this deduction began in 2023, and its reinstatement could directly impact real estate firms by improving liquidity and incentivizing new development and property improvements.
Challenges and considerations
Despite the House’s aggressive stance, the conditional $4.5 trillion tax cut figure introduces fiscal constraints that could force tough trade-offs. The Congressional Budget Office has estimated that extending TCJA cuts alone would cost approximately $5 trillion over 10 years, meaning the allotted spending would be insufficient for a full extension. If additional measures are included, lawmakers may need to identify new revenue sources or limit the duration of extensions.
Further complicating matters is the fact that that Senate Republicans and Trump wish to make the TCJA permanent, which creates several points of tension, including how such legislation would be scored and whether deficit hawks would support it.
For real estate firms, this means that tax planning remains in flux. A reduction in the SALT deduction cap, for example, would benefit high-income investors and property owners in high-tax states like New York. However, potential offsets (such as limiting business-related SALT deductions, repealing energy incentives or adjusting carried interest treatment) could introduce new costs and considerations.
Staying ahead of the curve
As the House and Senate work to reconcile their competing budget resolutions, real estate professionals should prepare for multiple potential outcomes. The House’s single-bill strategy has Trump’s backing, increasing pressure on the Senate to follow suit. However, at this time, the upper chamber does not appear to be capitulating, as they are not expected to take up the measure for weeks. Further, several significant procedural hurdles remain, and any final resolution will require approval from both chambers.
A failure to align could delay tax reform, leaving real estate investors uncertain about long-term depreciation schedules, interest deduction limits and the future of critical tax incentives. The industry should also keep an eye on potential revenue-raising measures that could impact real estate investment structures and profitability.
With so much at stake, real estate firms must remain proactive. Engaging in scenario planning, reassessing investment strategies and staying informed about legislative developments are all critical steps. Baker Tilly is keeping a watchful eye on these discussions, providing insights and guidance to help real estate professionals navigate the evolving tax landscape.
Based on laws proposed and passed on March 17, 2025.
About the author
Steven Schlachter
Principal, Baker Tilly
steven.schlachter@bakertilly.com
(516) 240 4317
As a tax practitioner and business consultant, Steven advises real estate owners, developers and operators on complex tax matters.
