On May 12, 2025, House Republicans introduced a $4.9 trillion tax proposal strategy strongly supported by President Donald Trump, aiming to reshape the tax landscape significantly. Key components of this plan directly impact real estate investors and professionals, particularly concerning cost segregation strategies and energy efficiency incentives like Sections 179D and 45L. 
Key Tax Provisions Affecting Real Estate and Energy Incentives
Restoration of 100% Bonus Depreciation
Tax Cuts and Jobs Act of 2017 introduced a provision allowing businesses to immediately deduct 100% of the cost of qualifying assets, a measure known as bonus depreciation. This benefit began to phase out in 2023 and is scheduled to decrease to 40% in 2025. The proposed 2025 tax package aims to restore the full 100% bonus depreciation retroactively to January 20, 2025, enabling businesses to fully expense qualifying assets in the year they are placed in service.
Significance of 100% Bonus Depreciation for Real Estate Investors Restoring full bonus depreciation could have a profound impact on real estate investment strategies. Investors who had scaled back their acquisition plans due to the declining bonus depreciation percentages might now reconsider their approach. Real estate professionals should evaluate which assets would most benefit from accelerated depreciation, especially those planned for 2025.
Furthermore, it will be essential to track how the IRS implements these changes, as procedural updates might affect when and how investors can claim the deduction. Proactive planning will help avoid missed opportunities to maximize deductions in the tax year when assets are placed in service.
Proposed Elimination of Section 45L Energy Efficient Home Credit
The Section 45L credit offers tax incentives to developers for constructing energy-efficient residential properties. The 2025 tax proposal aims to eliminate this credit for homes acquired after December 31, 2025, unless construction commenced before May 12, 2025.
Eliminating the 45L credit could significantly impact residential developers, particularly those specializing in multi-family housing and energy-efficient residential projects. Developers should assess ongoing and planned projects to determine whether they qualify under the current regulations. Those that do may want to accelerate construction timelines to meet the required deadlines.
Potential Changes to Section 179D Energy Efficient Commercial Building Deduction
179D provides valuable tax deductions to commercial building owners and designers who make energy-efficient improvements. Although there is currently no proposal to eliminate the deduction, ongoing discussions in Congress could impact its future. While some lawmakers support maintaining the deduction for its positive impact on energy conservation and job creation, others are weighing potential changes as part of broader fiscal planning.
Strategic Considerations for 179D Planning Given the uncertain future of 179D, it is crucial for real estate professionals and CPAs to stay updated on legislative developments. Those planning large commercial upgrades or energy efficiency projects should consider initiating studies and gathering required documentation sooner rather than later. Positioning projects as energy-efficient now could help secure deductions even if legislative changes come into effect later.
Implications for CPAs Working with Real Estate Clients
CPAs advising real estate clients should consider the following actions in light of the proposed tax changes:
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- Reevaluate Depreciation Strategies: With the potential reinstatement of 100% bonus depreciation, CPAs should assess clients’ asset purchases to maximize immediate deductions.
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- Monitor Section 179D Developments: Stay informed about legislative changes to Section 179D to advise clients accurately on energy-efficient improvements and associated deductions.
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- Conduct Cost Segregation Studies: Encourage clients to leverage 100% bonus with cost segregation studies to unlock immediate cash flow and significant tax savings in this challenging real estate market.
Real estate investors should consider the following in response to the proposed tax plan:
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- Accelerate Asset Purchases: Real estate investors should start planning now to be ready for potential opportunities in 2025. Position yourself to take advantage of 100% bonus depreciation by ensuring assets can be placed in service if the proposed changes are approved.
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- Invest in Energy Efficiency: Despite uncertainties around Section 179D, investing in energy-efficient improvements can offer tax benefits and appeal to environmentally conscious tenants.
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- Consult with Tax Professionals: Real estate investors should begin discussions with their tax professionals now to evaluate potential acquisition strategies for 2025. If the proposed 100% bonus depreciation is passed into law, having a plan in place in order to place assets in service could maximize tax savings and cash flow. Early planning ensures you’re prepared to act if the opportunity arises.
Balancing Risk and Opportunity While the proposed tax changes may benefit real estate investors, they also come with uncertainties and potential shifts in the regulatory landscape. Proactive consultation with tax professionals, coupled with strategic planning, will help mitigate risks and capitalize on potential benefits as legislation evolves.
President Trump’s 2025 tax proposal presents significant changes that could impact real estate investment and development strategies. By understanding and proactively responding to these proposed changes, investors and tax professionals can position themselves to maximize benefits and minimize potential drawbacks.
Take Action Now — Risk-Free.
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