How the One Big Beautiful Bill Act Affects Self-Directed IRA Real Estate Investors
The One Big Beautiful Bill Act was signed into law on July 4th, 2025, making permanent many of the tax provisions from the Tax Cuts and Jobs Act. While there’s been a lot of discussion about the benefits for real estate investors, it’s crucial to understand which provisions apply to real estate held within your self-directed IRA — and which don’t.
In my 20+ years working with self-directed IRA clients, one of the most common misconceptions I encounter is assuming that all tax benefits available to real estate investors apply to investments held within retirement accounts.
They don’t.
In this article, I want to walk you through what the OBBBA actually means for self-directed IRA investors. I’ll cover two key benefits that may impact your retirement planning, and then explain why many of the other “real estate benefits” you’re hearing about only apply to real estate held outside your self-directed IRA.
Lower Individual Tax Rates: More Money for Self-Directed IRA Contributions
The most immediate benefit for self-directed IRA investors — and indeed for all of us — is pretty straightforward. You’re going to keep more of your money going forward, which means more capital available for investing.
The OBBBA makes the lower individual tax rates permanent and enhances the standard deduction available to taxpayers. In 2025, the standard deduction is $15,750 for single filers and $31,500 for married couples filing jointly. And if you’re over 65, you can claim additional deductions on top of the standard if you’re under a certain income threshold.
If you redirect your tax savings into your retirement accounts, the compounding effect over 10 to 20 to 30 years can be substantial.
Next tax season, run an experiment. Calculate the difference between what you owe for 2025 and what you would have owed if tax rates had gone back up. Consider contributing the difference to your IRA.
Permanent Estate Tax Benefits: Building Generational Wealth
The OBBBA also makes permanent the doubled estate tax exemption, which is now $15 million per person or $30 million per married couple. This is huge for ultra-high-net-worth families building generational wealth, as the expiration of the TCJA was set to revert the estate tax exemption back down to about $7 million per person.
This provision fundamentally changes how we think about wealth transfer and inherited retirement accounts.
When you pass away, your self-directed IRA becomes an inherited IRA for your beneficiaries. Under current rules (thanks to the SECURE Act), most non-spouse beneficiaries must withdraw the entire inherited IRA within 10 years.
However, with the higher estate tax exemption, more of your estate — including your IRA assets — can pass to your heirs without federal estate tax implications.
This is particularly powerful for self-directed IRA owners who invest in appreciating assets like real estate. Let’s say your self-directed IRA holds $9 million in rental properties at the time of your death. Your beneficiaries will inherit these properties through the IRA, and if they’re designated beneficiaries, they’ll have 10 years to decide whether to liquidate them or continue holding them.
With the permanent $15 million estate tax exemption, they won’t face additional estate taxes on those inherited assets.
What Doesn’t Apply to Self-Directed IRA Real Estate Investments?
Unfortunately, many of the “real estate benefits” in the OBBBA don’t apply to properties held within self-directed IRAs. The three biggest include:
The 20% Qualified Business Income Deduction
Enhanced Business Expensing
Business Interest Deduction Relief
The 20% Qualified Business Income Deduction
What it is: The OBBBA makes permanent the 20% deduction for qualified business income from pass-through entities like partnerships, LLCs, and S corporations. Many real estate investments are structured as pass-through entities.
Why it DOESN’T apply to SDIRA investments: Your IRA is the taxpayer, not you personally. Since IRAs don’t pay income taxes (traditional IRAs are tax-deferred, Roth IRAs are tax-exempt), there’s no tax benefit from this deduction for investments held within your IRA.
Why it DOES apply to real estate outside your SDIRA: If you own rental properties personally or through a partnership outside your IRA, you can potentially deduct 20% of the qualified business income on your personal tax return.
Enhanced Business Expensing
What it is: The OBBBA makes permanent the ability to immediately expense (or accelerate depreciation on) business property and improvements.
Why it DOESN’T apply to self-directed IRA investments: IRAs don’t take depreciation deductions or business expense deductions. The tax-deferred nature of traditional IRAs and tax-exempt nature of Roth IRAs means these deductions provide no benefit to the IRA.
Why it DOES apply to real estate outside your IRA: If you own rental properties personally, you can accelerate depreciation deductions and immediately expense qualifying improvements, potentially reducing your current tax liability.
Business Interest Deduction Relief
What it is: The OBBBA restores the ability to deduct business interest expenses by allowing depreciation and amortization to be added back when calculating the limitation.
Why it DOESN’T apply to self-directed IRA investments: IRAs don’t deduct interest expenses. When your IRA borrows money (such as for a leveraged real estate purchase), the interest is simply a cost that reduces the IRA’s returns, but it’s not a tax deduction.
Why it DOES apply to real estate outside your IRA: If you’re personally borrowing to finance real estate investments, this provision can help you deduct more of your interest expenses.
The Key Distinction: Tax-Deferred vs. Tax-Advantaged
The reason these provisions don’t apply to self-directed IRA investments comes down to a fundamental principle: IRAs are already tax-advantaged vehicles. Traditional IRAs grow tax-deferred, and Roth IRAs grow tax-free.
There’s no additional tax benefit to be gained from business deductions, appreciation, or income deductions because the IRA itself doesn’t pay taxes.
This is why it’s crucial to work with a self-directed IRA administrator who understands these distinctions. At Chicago Trust Administration Services, we help clients understand not just what investments they can make within their IRAs, but also how the tax implications differ from investments held outside retirement accounts.
What This Means for Your Investment Strategy
Understanding these distinctions helps you make better strategic decisions:
Maximize personal tax savings from the permanent lower rates to fund IRA contributions
Plan for generational wealth transfer more easily with the permanently increased estate tax exemptions
Consider the tax efficiency of holding certain investments inside versus outside your IRA
We’re here to help you navigate these complexities and structure your investments appropriately. We understand the compliance requirements and can help you make informed decisions about what belongs in your IRA and what doesn’t.
To see how we can help you capitalize on these changes, I invite you to schedule a complimentary meeting with us by calling 312-869-9394 or emailing steve@ctasira.com.
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*The content and opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
**CTAS professionals are not financial advisors and cannot provide advice or recommendations regarding specific investment decisions.