Real estate investors face the potential expiration of one of the most impactful tax benefits introduced in recent years—the Qualified Business Income Deduction (QBID). This deduction, part of the 2017 Tax Cuts and Jobs Act, allows certain pass-through entities to deduct up to 20% of their qualified business income. For many in the real estate investment community, this has significantly lowered taxable income and improved portfolio performance.

But with the provision set to sunset at the end of 2025 (unless extended by Congress), it’s time to plan with and without it in mind. Whether you own a portfolio of income-producing properties or are just starting to diversify your investments, this potential tax law change deserves your attention.

Why the QBID Matters for Real Estate Investors

The QBID has provided critical tax relief to investors operating through pass-through entities like LLCs, partnerships, and S corporations. For qualifying real estate businesses, the deduction has helped:

  • Lower effective tax rates 
  • Increase after-tax cash flow 
  • Boost return on investment 

This benefit has been especially valuable for passive investors planning for retirement or building generational wealth. As one Frederick-based CPA, Terri L. Almacy of Almacy & Company, CPAs, P.A., shared:

“I am not entirely convinced that the QBID will expire since we have a Republican-led House and Senate. I try to keep an open mind about tax law changes before they actually happen. So much can happen before a change in law is finalized! Makes me wish I had a crystal ball!”

Indeed, the political outlook is murky. But for investors, waiting for clarity might mean missing out on opportunities to prepare strategically.

What Happens If the QBID Expires?

If the deduction expires without renewal, investors with pass-through entities could see their taxable income increase significantly. For high earners, this means a return to pre-2018 effective tax rates—with fewer buffers to absorb that hit.

While this won’t affect the fundamentals of sound real estate investing—location, property quality, tenant mix—it will impact how much of your investment income ends up in your pocket.

This shift especially impacts those who:

  • Own properties under individual names or disregarded entities 
  • Have relied on the QBID to optimize their after-tax returns 
  • Are nearing retirement and need predictable income 

Strategic Moves to Consider Now

As Almacy notes, many of the tools available to help investors reduce taxes are already wise practices—regardless of QBID status:

“Assuming the QBID does expire without renewal, then I think that entity restructuring, increased depreciation, and using 1031 exchanges to postpone gains are all great tools, but I already consider these items even with the QBID in place.”

That means smart investors can start planning today by reviewing these approaches:

1. Review Your Entity Structure

Your business entity type can greatly influence your tax liability. It might be time to:

  • Reassess whether a sole proprietorship or single-member LLC is still optimal 
  • Consider a partnership or S-corporation to better manage future tax obligations 
  • Work with a CPA to ensure you meet the IRS’s definition of a “qualified trade or business” 

This kind of restructuring isn’t just about tax rates—it’s also about control, succession planning, and liability protection.

2. Maximize Depreciation Opportunities

Depreciation remains one of the most powerful tools in real estate. With or without QBID, cost segregation studies can accelerate deductions and increase cash flow.

Bonus depreciation is scheduled to phase out by 2027, so now’s the time to:

  • Identify properties where accelerated depreciation might apply 
  • Invest in improvements that can be written off more quickly 
  • Leverage current tax laws while they’re still favorable 

Leverage Like-Kind Exchanges and Estate Planning

Another often-underused tool is the 1031 exchange. By reinvesting proceeds from the sale of one property into another, investors can defer capital gains taxes and continue compounding their portfolio growth.

Other strategies include:

  • Charitable remainder trusts (CRTs): for investors with philanthropic goals 
  • Estate freezes and gifting: to pass properties on with reduced tax impact 
  • Installment sales: to spread out gain recognition 

These aren’t just useful if QBID expires—they’re smart wealth-building strategies in any market cycle.

Planning in an Uncertain Tax Climate

It’s true that tax policy is driven by political winds. Many experts agree that predicting future tax law is part science, part speculation. That’s why working with trusted advisors who stay up to date on tax code changes is so crucial.

At VCRE, we’re not tax preparers, but we work closely with local professionals to help you navigate the full scope of your investment decisions—from acquisition to sale, and everything in between. We’ve helped countless investors in Frederick, Carroll, and Washington Counties structure their deals in ways that align with both their tax goals and long-term investment plans.

How VCRE Supports Smarter Investing

Whether you’re managing a diverse portfolio or just purchased your first rental property, having a team that understands both the local real estate landscape and the financial levers that impact your returns is invaluable.

VCRE helps our clients by:

  • Connecting investors with CPA and legal partners for proactive planning 
  • Identifying properties that support both cash flow and tax strategy goals 
  • Supporting long-term planning for income, appreciation, and legacy 

Next Steps: Be Proactive, Not Reactive

No one can predict exactly what Congress will do in 2025—but smart investors aren’t waiting to find out.

Here’s how to start:

  • Meet with your CPA or tax advisor this year to model your income with and without the QBID 
  • Evaluate your current ownership structures and depreciation strategies 
  • Contact your us to assess how your portfolio aligns with your retirement or reinvestment goals 

And if you’re seeking local expertise in commercial real estate with a reliable, knowledgeable partner who understands Frederick’s market—we’re here to help.