Some Big, Beautiful Real Estate Perks

The United States of America celebrated its 249th “birthday” on Friday. The country is now headed to its semiquincentennial, sestercentennial, or – more casually – the big two-five-oh.

Of course, 21st-century Americans also have burdens our founders hoped we’d never see – including excessive taxation. The taxes they rebelled against those two and a half centuries ago are nothing compared with what we face today.

Early Americans paid between 1% to 1.5% of their income to the government.

Compare that with 2017 taxes, before President Trump’s original cuts, when we were paying 10% to 39.6% – on the federal level alone. And while that’s before deductions, it’s still an intense increase, no matter how you split it.

After 2017, those rates fell to 10% to 37%, saving citizens hundreds and even thousands of dollars each. While inflation has since taken a large bite from those breaks, it could have been a whole lot worse without them.

Back in December, I reminded readers that the 2017 changes for individuals “were set to expire in 2025.” And “the changes for businesses were set to expire in 2028.” However, I also predicted that both would “be extended now” that Trump was returning to the White House.

Sure enough, that’s precisely what just happened with the One Big Beautiful Bill he just signed into law.

But there’s more than just codifying the tax cuts…

A New Deduction for Homebuyers

I wrote about the One Big Beautiful Bill last Wednesday after the Senate sent it back to the House.

At the time, I thought there’d be more debate before it passed. Yet it was just another two days before Trump sat down in the Oval Office to sign it into law.

On the bill’s merits, I wrote on Wednesday:

President Trump declared that Inauguration Day 2025… began the “Golden Age of America,” and I still think he’ll be proven right about that in the end.

In which case, one of the catalysts toward that goal will probably be the One Big Beautiful Bill…

I covered how it extends the 2017 tax cuts and opens up more oil and gas drilling leases. Today, though, I want to approach it from a pure property angle.

Trump is, after all, a real estate man at heart. And there’s an important deduction buried in the document for home buyers, especially first-time home buyers.

If you’ve ever bought a house, you’re likely familiar with mortgage insurance (“MI”) premiums. They’re an extra payment borrowers have to make, typically when they’re unable to produce a 20% down payment. With the median American home at some $400,000, that would be $80,000 – a big lift for most people, especially first-time buyers.

This is one of the reasons why there are so few first-time buyers, as The Wall Street Journal reported this morning.

Now, mortgage insurance used to be deductible back in 2021. But that provision expired, leaving additional tax burdens on middle-class homeowners across the country.

That ends in 2026. Better yet, the deductible won’t expire again: It’s now permanent.

As Eric Peck over at MortgagePoint explained on July 4:

• The MI premium deduction [when last implemented] was claimed 44 million times, representing a combined $65 billion in deductions.

• 4 million homeowners claimed the deduction annually.

• The average deduction amount was $1,454 per qualified taxpayer.

It also encourages current renters to enter the housing market. “Rather than waiting years to save for large downpayments, private MI allows homebuyers to get off the sidelines sooner.”

100% Bonus Depreciation Is Fully Restored

I did address bonus depreciation last week. But since this is my official real estate rundown of the One Big Beautiful Bill, I’ll cover it again.

Bonus depreciation has been an incredibly valuable tax strategy for real estate investors and business owners alike. It allows companies to recover the cost of assets with a shelf life under two decades – such as equipment or machinery – the same year they were purchased instead of little by little over time.

“This allows them to invest and grow more quickly,” I explained, “rather than wait for those depreciation benefits to trickle in.” And while it:

… doesn’t apply to many commercial real estate [(“CRE”)] structures like retail buildings, offices, etc… it does cover “qualified improvement property.” Think renovations and general maintenance – HVAC, lighting, interior doors, etc.

As a CRE developer, I promise that every little bit helps.”

Over the last few years, this enormously helpful tax clause has been progressively phased down. But now it’s back in full force just as long as the assets are placed in service before January 1, 2030. (Then the provision expires unless it’s renewed again.)

Better yet, businesses and investors don’t even have to wait until 2026 to start saving. If you put money down on qualified assets as of January 19, 2025, you’re allowed to capitalize on 100% bonus depreciation.

Keep in mind, this benefits both landlords (new purchases and ground-up builders) and tenants alike who want to renovate, upgrade, furnish, fix up, or equip their building spaces.

Incidentally, it also benefits my Wide Moat Confidential pick in the aircraft space. Because aircraft are included in the list of qualifying assets. Subscribers should be on the lookout for an update on this front soon.

Opportunity Zones Made Permanent

Opportunity Zones first entered the conversation in 2015 thanks to the Economic Innovation Group. That institution released a concept paper titled “Unlocking Private Capital to Facilitate Economic Growth in Distressed Areas.”

It referred to low-income communities where new investments could best benefit both residents and backers alike. The idea was enough of a hit that legislation passed in 2017 to incentivize such activity based on federal, state, or city designations.

Now, Trump’s One Big Beautiful Bill gives:

• A permanent 12% boost to low-income housing tax credit authorities

• A lower 25% bond test

• A renewed and permanent Opportunity Zone program with added oversight

According to Department of Housing and Urban Development Secretary Scott Turner:

The momentum of Opportunity Zones has already lifted more than 1 million Americans out of poverty, attracted more than $89 billion in investment, increased housing supply by more than 300,000 new residential addresses, and created more than half a million jobs.

Long-term CRE investors also benefit from this provision, as well as the expanded rural development options and new compliance requirements contained within Trump’s new law. While that latter detail does raise the bar for CRE reporting, it also adds credibility to the Opportunity Zone program that should attract even more money going forward.

REITs Win, Too

Last but certainly not least, let’s talk about real estate investment trusts, or REITs.

As most of my readers know, I’m a big fan. So I was happy to see President Trump give them some love in his One Big Beautiful Bill.

This includes a permanent qualified business income deduction of 20%. It preserves the eligibility of REIT ordinary dividends, effectively lowering the average tax rate on REIT dividends to about 24%. The chart below will give you some idea of the impact:

Source: iREIT + HOYA

Nor is that the only positive change. As I explained in REITs for Dummies, the REIT Modernization Act of 1999 enabled REITs to form taxable REIT subsidiaries (TRSs) to provide services to their property tenants without jeopardizing their legal standing. They could then own up to 20% of these entities if they so chose.

But that number will now be changing to 25% next year, allowing REITs to benefit from TRSs more significantly.

(Note: We will be adding REIT and BDCs trackers as upgrades to The Wide Moat Letter.)

All told, I expect to see a new wave of real estate investment – both commercial and private – sweep over the country. Maybe it will begin slowly enough this year. But give it time.

Before long, you’re going to see real estate opportunities crop up everywhere. The kind that betters builders… expands employment… and grows communities from sea to shining sea.

That’s just part of the power contained inside Trump’s One Big Beautiful Bill. There’s plenty more to explore – and profit on – from here.

Regards,

Brad Thomas
Editor, Wide Moat Daily