What California Property Owners Need to Know About the “Big Beautiful Bill”
The financial landscape for California property owners is changing in a major way. The recently passed “Big Beautiful Bill” introduces powerful tax benefits, opportunities for short-term savings, and some long-term challenges that require strategic planning. Whether you own a residential home, rental property, or commercial building, understanding these updates is essential to protecting your investments, maximizing cash flow, and preparing for the future.
This post breaks down what the Big Beautiful Bill means for property owners in California, what opportunities you should act on now, and what to watch for in the coming years. All information in this post is sourced from RELAW, APC California Real Estate Attorneys (“What California Residential & Commercial Owners Need to Know about the Big Beautiful Bill”). We highly recommend consulting with a qualified tax advisor or real estate attorney to see how these changes apply to your unique situation.
Why the Big Beautiful Bill Matters for California Property Owners
California is already one of the most highly regulated and taxed real estate markets in the country. Property owners face unique challenges with state taxes, building codes, and shifting incentives around energy efficiency and housing.
The Big Beautiful Bill brings both immediate relief and future risks. On one hand, it offers stronger tax deductions and ways to reduce your taxable income right away. On the other hand, several of these benefits will “sunset” (expire) within the next few years, meaning owners who don’t act quickly may miss out.
At Elite Escrow Services, we believe that knowledge is power. Understanding these updates will help you make informed decisions about your property ownership, renovations, and long-term estate planning.
Short-Term Benefits (6–18 Months)
The Big Beautiful Bill delivers some of its most significant perks in the short term. Here are the key opportunities for California property owners between now and 2026.
1. 100% Bonus Depreciation Restored
Effective January 20, 2025, property owners can deduct 100% of the cost of short-lived assets—such as HVAC systems, lighting, and flooring—in the first year they are placed in service.
Why this matters: Instead of spreading out deductions over several years, you can write off the entire expense right away.
Who benefits most: Owners who are renovating properties, adding energy-efficient features, or upgrading commercial spaces.
Example: If you install a $20,000 HVAC system in 2025, you can deduct the full amount that year instead of spreading it over a 10-year period.
2. Energy Efficiency Deduction (§179D) Maintained
For commercial property owners, the §179D deduction for energy-efficient buildings continues. If you meet wage and apprenticeship requirements, you can deduct up to $5.81 per square foot for qualifying upgrades. This benefit remains available until June 2026.
Best moves now: Invest in green retrofits like LED lighting, improved insulation, or updated HVAC systems.
Why it’s urgent: This deduction sunsets in 2026, so waiting too long could mean missing out.
3. Enhanced Qualified Business Income (QBI) Deduction
The QBI deduction, which allows pass-through entities to deduct a percentage of their income, has been permanently increased from 20% to 23%.
What this means: If you own rental property through an LLC, partnership, or S corporation, you can deduct nearly one-quarter of your qualified income.
Why this matters: This is one of the strongest tools for real estate investors to lower taxable income.
4. SALT Deduction Boost for California Owners
State and local tax (SALT) deductions are particularly important in California, where property taxes can be high. Under the new bill, the SALT cap rises from $10,000 to $40,000 for married couples earning up to $500,000.
Impact: Significant relief for homeowners and investors with large property tax bills.
Example: If you pay $25,000 in property taxes annually, you can now deduct the full amount, whereas before you were capped at $10,000.
5. Opportunity Zones and 1031 Exchanges Preserved
Both 1031 exchanges (which let you defer taxes when swapping one investment property for another) and Opportunity Zone incentives remain in place.
Takeaway: Investors can continue to build portfolios without triggering immediate capital gains taxes.
Long-Term Implications (2–7+ Years)
While the short-term benefits are exciting, property owners should also pay close attention to what’s coming down the road.
1. Sunsets on Key Benefits
The §179D deduction expires in June 2026, so owners must act quickly on energy upgrades.
Bonus depreciation is available through 2029, but after that, it phases out. Owners relying on accelerated deductions will need to adjust tax strategies.
2. Estate and Wealth Transfer Planning
The bill raises the estate tax exemption to $15 million per individual, which creates opportunities for intergenerational wealth transfers.
Why this matters: High-net-worth individuals can pass more real estate to heirs without triggering estate taxes.
Action item: Now is the time to update estate plans and trusts to maximize these benefits.
3. Clean Energy Credit Phase-Outs
Federal incentives for solar panels, wind projects, EV charging stations, and battery systems will begin phasing out in the mid-2020s.
Impact: Installing renewable energy systems will become more expensive without these credits.
Planning tip: If you are considering solar panels or EV infrastructure, lock in projects before incentives decline.
4. State Budget and Program Cuts
Federal cuts to programs like Medicaid, housing grants, and climate finance could reduce state-level support.
Who is affected: Affordable housing developers and commercial owners who depend on subsidies or grants may face funding gaps.
Outlook: Property owners should prepare for rising costs and fewer subsidies in the coming years.
What California Property Owners Should Do Now
The Big Beautiful Bill is both an opportunity and a warning sign. Here’s a checklist of smart moves to make right away:
Commission cost segregation studies
Break down property assets to unlock immediate bonus depreciation benefits.Accelerate green investments
Complete energy-efficient upgrades before the June 2026 sunset.Review holding periods
Align property acquisitions and renovations with the bonus depreciation timeline.Leverage the SALT expansion
Reevaluate how higher deductions affect your property tax strategy.Update estate planning
Take advantage of the $15 million exemption for wealth transfers.Monitor federal and state program changes
Stay informed about shifts in housing and energy funding that could affect long-term costs.
Why Escrow Services Matter in This New Landscape
At first glance, escrow services may seem unrelated to tax law. But in reality, escrow plays a central role in protecting your interests when navigating these new rules.
During property sales: Escrow ensures that tax-related conditions, like 1031 exchanges, are handled correctly.
During renovations: Escrow can safeguard funds for improvements tied to depreciation or energy credits.
For estate transfers: Escrow ensures smooth ownership changes while protecting both parties.
At Elite Escrow Services, we work closely with real estate professionals, attorneys, and financial advisors to make sure transactions reflect the latest rules and strategies. Our goal is to deliver the Elite Difference: expertise, accuracy, and personalized service that helps you get the most out of your property.
Final Takeaways
The Big Beautiful Bill represents one of the most significant updates for California real estate owners in years. In the short term, it offers major wins through bonus depreciation, SALT deductions, and enhanced QBI benefits. But in the long term, looming sunsets and funding cuts mean property owners must plan carefully.
Now is the time to:
Take advantage of immediate deductions
Invest in green upgrades before deadlines
Reassess estate and wealth strategies
Monitor state and federal program impacts
By acting strategically, property owners can maximize today’s opportunities and prepare for tomorrow’s challenges.
For additional details, we credit and thank RELAW, APC California Real Estate Attorneys, for their expert analysis of the Big Beautiful Bill. You can learn more at https://relawapc.com/
About Elite Escrow Services
Elite Escrow Services has proudly served San Diego since 1971. As one of the longest-standing independent escrow companies in Southern California, we provide expert, concierge-style escrow services to real estate agents, brokers, buyers, and sellers. Our experienced team delivers the Elite Difference—personalized service, accuracy, and peace of mind in every transaction.
If you’d like to learn more about how these legislative changes may affect your next real estate transaction, contact our team today.