How H.R.1 Impacts Real Estate Investment

The One Big Beautiful Bill Act (H.R.1), signed into law on July 4, 2025, is a sweeping piece of legislation that reshapes U.S. tax and spending policies. Among its many provisions, this act, also known as the Big Beautiful Bill 

Cost segregation is a tax-saving technique that allows property owners to reclassify certain components of commercial or investment properties for faster depreciation. Instead of depreciating an entire building over 27.5 or 39 years, cost segregation identifies assets like HVAC systems, lighting, or landscaping that can be depreciated over 5, 7, or 15 years. H.R.1’s tax provisions, which extend and expand the 2017 Tax Cuts and Jobs Act (TCJA), make this strategy even more attractive by preserving and enhancing deductions that complement cost segregation.

If we use a theoretical example of a $3 million commercial property. Under standard IRS rules, you would depreciate the building (minus land value) over 39 years, yielding annual deductions of about $76,000. However, a cost segregation study identified $900,000 in assets eligible for shorter depreciation schedules. By leveraging H.R.1’s permanent extension of 100% bonus depreciation for certain assets, you may deduct a significant portion of these costs in the first year, potentially saving over $200,000 in taxes upfront. This immediate cash flow boost allows him to reinvest in additional properties or upgrades.

H.R.1’s tax provisions are a cornerstone of its appeal for real estate investors. The act makes permanent the TCJA’s increased standard deductions, qualified business income deductions, and immediate expensing for short-lived assets, all of which align with cost segregation’s goals. For example, the permanent expensing provision allows businesses to deduct the full cost of qualifying assets—like those identified in a cost segregation study—in the year they’re placed in service. This is a boon for investors, who can now front-load deductions without worrying about the expiration of bonus depreciation, which is phasing down but remains impactful in 2025.

Cost segregation isn’t without costs. A professional study can range from $5,000 to $20,000, depending on the property’s complexity. However, for high-value properties, the tax savings far outweigh this expense. Investors must also consider potential recapture taxes upon selling the property, though H.R.1’s tax-friendly provisions, such as the increased estate and gift tax exemptions, can help mitigate this through strategic planning.  You should always consult your Certified Public Accountant to understand how these various provisions impact your situation.

While H.R.1’s focus extends beyond real estate—to immigration, Medicaid, and SNAP reforms—its tax policies create a fertile ground for cost segregation. For investors, the act’s permanence of TCJA benefits ensures long-term predictability, making cost segregation a must-explore strategy. Big Beautiful Bill’s success shows how H.R.1 can transform real estate investments, turning tax savings into growth opportunities. Consult a tax professional to see if this powerful combination can work for you.