Several newly passed elements are worth noting. These provisions may create opportunities for enhanced tax efficiency. As always, investors should consult with their personal tax advisors and evaluate them in the context of their individual financial situations.
100% Bonus Depreciation: Accelerating Deductions
One beneficial aspect of the bill for real estate is the extension of 100% bonus depreciation. This provision allows for the immediate expensing of certain capital investments in the first year for qualified property acquired and placed in service after January 19, 2025.
This results in real estate investments offering the potential to defer taxes due to allocations of losses to investors in early years of an investment. For example, in the context of MLG Capital’s Private Fund VII, we estimate that this may result in 2025 beneficial net rental losses of approximately 50-60%[1] as a percentage of capital contributed while also receiving nontaxable distributions. Assuming these losses are passive, which is the case for most Private Fund VII investors, they then must be matched up with passive income prior to being released into an investor’s personal tax return. The application of these losses in an investor’s personal tax picture could result in beneficial tax savings.
Preserving the Tax Rate Benefit of RE Investing
Although not a new provision, a key tax planning opportunity remains unchanged: the ability to combine passive Section 1231 gains with passive net rental real estate losses. This strategy has historically supported after-tax return optimization for many investors by releasing ordinary losses into their tax picture after they are matched-up with passive capital gains. Once released, these losses can offset other ordinary income sources an investor has, which may help shift an investor’s effective tax rate toward capital gain rates and in turn reduce tax liability.
These are often hidden tax benefits that materialize on the investor’s personal income tax return but can be great for after-tax returns. That said, tax laws are complex and subject to change, and investors should consult with their tax professionals to understand how these strategies may apply to their circumstances.
Market Conditions: A Time for Disciplined Evaluation
Beyond tax policy, current market dynamics suggest a potentially favorable environment for long-term real estate investment. We believe factors such as reduced construction activity, capital constraints, and shifting valuations may create opportunities for well-positioned investors. For additional insights, view our full 2025 Spring Market View.
Informed Action in a Dynamic Environment
The newly passed “One, Big, Beautiful” tax bill underscores the importance of staying informed and adaptable. While the potential for enhanced tax efficiency is compelling, it’s just one piece of a broader investment picture.
At MLG Capital, we remain committed to helping our investors navigate this evolving landscape with clarity and care. We encourage all investors to engage with their advisors, ask questions, and consider how current developments align with their long-term goals.
Take the Next Step with Private Fund VII
If you’re interested in exploring how these tax advantages and market dynamics could work for your portfolio, now is the time to learn more about MLG Capital’s Private Fund VII. This diversified real estate offering is designed to help investors pursue long-term growth and tax efficiency in today’s evolving environment.
Hear directly from our team and discover how you can get involved today – Inside MLG’s Latest Offering: Private Fund VII and the Power of Diversification
[1] Estimation is made based on historical data from actual year 1 passive loss allocations from MLG’s series of private real estate funds and MLG’s internal estimation of additional losses due to the recent tax law changes known as the “One Big Beautiful Bill Act.” This percentage will vary based on an investor’s investment timing and the funds acquisition of properties. Passive taxable losses will be reduced after year 1 of an investment into a fund.
Disclaimer
Securities offered through North Capital Private Securities, Member FINRA/SIPC. Its Form CRS may be found here and its BrokerCheck profile may be found here. NCPS does not make investment recommendations and no communication, through this website or in any other medium, should be construed as a recommendation for any security offered on or off this investment platform.
This article is intended solely for accredited investors. Investments in private offerings are speculative, illiquid, and may result in a complete loss of capital. Past performance is not indicative of future results. Prospective investors should conduct their own due diligence and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help them to understand and assess the risks associated with any investment opportunity.
This article contemplates complex tax concepts that each recipient should review with their professional tax advisor for further guidance. This presentation should not be considered tax advice and each recipient should consult with their tax advisor regarding the content, definitions and assumptions outlined in this article.
Private Fund VII includes risks and uncertainty many of which are not outlined herein including, without limitation, risks involved in the real estate industry such as market, operational, interest rate, occupancy, inflationary, natural disasters, capitalization rate, regulatory, tax and other risks which may or may not be able to be identified at this time and may result in actual results differing from expected. Advisory services offered through MLG Fund Manager LLC, an investment adviser registered with U.S. Securities & Exchange Commission.
