The recently enacted One Big Beautiful Bill Act (the “OBBBA”) serves as “Christmas in July” to many owners of small businesses and investment real estate. Federal taxes for many will decrease and certain tax benefits become “permanent” (e.g. Qualified Opportunity Zones), Qualified Business Income Deduction).

Like a belief in Santa Claus, the legislation “…may not increase the federal budget deficit outside a 10-year budget window.” Unclear to most is what happens when reality proves that lowering of certain taxes is not sufficiently offset by sufficient reductions in federal expenditures!

Here are some ideas for how to start a conversation with your prospects, regarding the OBBBA, to help them move toward making smart transaction decisions for 2025 and beyond.

1. 1031 SURVIVED. The 2017 Tax Cuts and Jobs Act (“TCJA”) disallowed personal property exchanges; OBBBA left intact 1031 Like Kind Exchanges of real property. Even if your prospect never invests in a Delaware Statutory Trust (“DST”), their knowing that there are 50+ available almost always, may remove a “speed bump” in their consideration to sell the realty. Options for use of a trust to accomplish an installment sale may accomplish a similar “speed bump” removal for a prospective business seller. NOTE – I serve as the Director – Investments for Crescent Securities, a Dallas based broker dealer.
2. QUALIED BUSINESS INCOME DEDUCTION. This 20% deduction of “qualified business income” under Section 199A was made permanent. Good place to start a conversation regarding choice of entity (e.g., LLC, Sub-S, C-Corp).
3. ROTH MAGIC IGNORED. The value for tax purposes of your IRA assets – key to determine the taxes due –  when converted to a ROTH IRA, can be reduced by investing into a real estate development, where prior to the conversion the asset receives a substantially lower third party qualified valuation (as with a development, the current value goes down as existing buildings are demolish and land is torn up [to prepare it for construction). The OBBBA is silent on this technique for tax reduction. Remember, it is not what an owner makes, it is what they get to keep…ideally with YOUR help!
4. SALT and PEPPER. The deduction for state and local taxes (“SALT”) for those with income under $500,000 was increased to $40,000 (from $10,000). Considering that some of what was once substantially funded by the federal government (e.g., public education, emergency relief, social services) will now shift to state and local government funding, anticipate substantial increases in state and local taxation (combined with increased need for charitable contributions to fund non-profits). Helping open the eyes of an owner to their NET long term taxes may help establish your creditability.
5. OZ 2027. Qualified Opportunity Zones (“OZ”) were made permanent. OZ is the ONLY way to convert capital gains from any of business, real estate, equipment, etc. INTO a tax deferred investment into any of the others! The Governors will select which census tracts in their state – which meet the new low-income requirements – will be eligible for OZ tax benefits. The Treasury Department will develop the new regulations for OZ. And individual state General Assemblies must decide if their state tax code will mirror OZ. Only those sales generating capital gains after December 31, 2026, qualify for this new OZ benefit.  This is a great time to have your prospects consider how them might contact their Governor (for zone designation favorable to them) and State Legislator (to push for quick adoption of OZ).

BOTTOM LINE

The OBBBA is over 940 pages long! The tax regulations to implement the bill will be 5x as long and will take months to be prepared in draft!

There is a level playing field. NO ONE knows for sure how EXACTLY the provisions will be implemented.  You can, though, help those “trusted advisors” who work with your potential prospects to carry – issue by issue – ways that an owner of a business or real property may want to reposition their owners to maximize their benefit from OBBBA.

And sometimes, as their tax picture becomes clearer, some owners may want to discuss how best to sell what they own.

You do NOT need to become a tax expert.  You do need to be brave to start the conversation with owners and their trusted advisors!