Real Estate LLCs in Texas - New Tax Law Impacts Investors in 2025

If you own rental properties through an LLC in Texas, there’s a big update you need to know. A new 2025 tax law is changing how income from real estate LLCs is treated—especially when it comes to deductions and pass-through income.

This could mean more tax liability, tighter compliance rules, and fresh risks for investors who aren’t paying attention. In this post, we break down what’s changing, who’s affected, and what you should do now to protect your profits.

"Stay informed and protect your investment: Texas real estate owners urged to catch the crucial 2025 update to avoid financial losses."

What’s Changing in Real Estate in 2025?

As of January 1, 2025, Texas adopted adjustments in line with new federal reporting guidelines for LLCs holding income-generating real estate. Key changes include:

• Stricter reporting of pass-through income

• Limits on accelerated depreciation for certain property types

• Increased audit targeting for LLCs reporting passive losses

• Mandatory beneficial ownership disclosures (per Corporate Transparency Act)

Who Is Most Affected?

These rules affect:

• Rental property investors using LLCs

• Real estate syndicates operating in multiple states

• Flippers or wholesalers using LLCs for short-term property deals

• Passive investors who distribute profits via K-1s

What This Means for Your Taxes

Many investors relied on cost segregation and aggressive depreciation to reduce taxable income. Under the new law:

• Certain accelerated depreciation deductions may be capped or delayed

• IRS may flag LLCs with repeated paper losses

• Non-compliant LLCs could lose liability protection in extreme cases

New Compliance Burden: Beneficial Ownership Reports

By 2025, all LLCs (including real estate holding entities) must file Beneficial Ownership Information (BOI) with FinCEN.

Failing to do so can result in $500/day penalties or criminal charges.

You must report:

• Full legal names

• Dates of birth

• Residential addresses

• ID documents of beneficial owners

What You Should Do Now

✅ Review your LLC structure and tax filings 

✅ Meet with a CPA familiar with real estate and BOI rules 

✅ Document operating agreements properly (especially if you have partners) 

✅ Consult with a Texas business attorney to ensure your LLC is legally sound under the new regime

How The Spencer Law Firm Can Help

We help real estate investors:

• Restructure or clean up outdated LLCs

• Draft proper operating agreements

• Ensure legal compliance under 2025 disclosure rules

• Minimize liability exposure in rental property operations

Don’t let new tax laws catch you off guard. Schedule a free consultation today to review your real estate LLC with a trusted Houston business law firm. Proactive legal guidance = long-term peace of mind.