The One Big Beautiful Bill (OBBB), enacted on July 4, 2025, is anticipated to have multifaceted implications for the real estate industry across America. The bill introduces a series of tax and policy adjustments that could influence investment decisions, development trends, and the overall demand for various property types.
Tax Incentives & Depreciation
100% Bonus Depreciation Reinstatement
The OBBB permanently reinstates 100% bonus depreciation for qualified tangible property placed in service after Jan. 19, 2025. This includes:
- building components and personal property with a five-year class life (i.e., parts of a building the IRS has classified as having a useful life of five years, such as specialized electrical systems, fixtures, carpeting, or plumbing systems serving a specific business purpose
- certain interior improvements, including partitions and non-load bearing walls; interior ductwork and vents; and more
- land improvements (e.g., parking lots, sidewalks)
The 100% bonus depreciation provision presents a significant opportunity for real estate investors to leverage cost segregation studies — engineering-based analyses that identify components of a building qualifying as tangible personal property or land improvements. These assets typically have shorter depreciable lives (5, 7, or 15 years) compared to the standard 27.5 or 39 years for the entire building. By reclassifying these shorter-lived assets, investors can apply 100% bonus depreciation to a portion of the property’s cost in the first year it’s placed in service.
Implication for Real Estate: The reinstatement of 100% bonus deprecation offers a substantial tax benefit, allowing investors and businesses to immediately deduct the full cost of eligible assets through cost segregation studies. This will significantly improve initial cash flow, making new acquisitions, renovations, and upgrades more attractive. For capital-intensive real estate ventures, this accelerated depreciation can free up capital for further investment.
Permanent Qualified Business Income (QBI) Deduction
The OBBB makes the 20% QBI deduction for pass-through entities, commonly used in real estate, permanent.
Implication for Real Estate: While the percentage remains the same, the permanence of the 20% QBI deduction provides crucial certainty for real estate professionals and investors operating as pass-through entities (e.g., partnerships, S corporations, LLCs), allowing for more predictable long-term tax planning.
Section 163(j) Limitation Reversion
For tax years beginning after Dec. 31, 2024, the business interest deduction limitation reverts to its pre-2022 calculation. It is once again based on 30% of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), rather than Earnings Before Interest and Taxes (EBIT), which was used 2022 to 2024.
Implication for Real Estate: The OBBB’s reversal of Section 163(j) limitation is largely favorable for capital-intensive sectors like real estate. By including depreciation and amortization in the base calculation, the Adjusted Taxable Income (ATI) is generally higher, allowing for larger interest expense deductions. This can ease access to financing and improve the financial viability of highly leveraged real estate projects — particularly those subject to the section 163(j) limitations.
Community Development & Affordable Housing Initiatives
Opportunity Zones (OZ) Program
The OBBB reshapes the OZ program, making it a permanent fixture. It introduces rolling five-year gain deferrals and a 10% basis step-up after five years for new investments made post-2026, replacing the previous fixed deadlines. Eligibility for new zones, designated every 10 years starting 2027, is stricter, focusing on genuinely distressed and rural communities and opening up a new category, “Qualified Rural Opportunity Funds” (QROFs), which offers an enhanced 30% basis step-up. Increased reporting requirements are also mandated for greater transparency.
Implication for Real Estate: The permanent extension and other enhancements signal a long-term commitment to attracting capital into designated low-income areas. The focus on genuinely distressed and rural communities, along with enhanced benefits for QROFs, could drive significant investment in these underserved markets for various real estate projects. Investors will have greater certainty and flexibility in planning their OZ investments.
Low-Income Housing Tax Credits (LIHTC) Modifications
The OBBBA introduces several key changes to LIHTC, including the restoration of the fixed 9% credit rate, a permanent 12% increase in annual state credit allocations, and a reduction in the bond financing threshold.
Implication for Real Estate: The LIHTC modifications aim to boost affordable housing development and expand access to low-income housing.
New Markets Tax Credits (NMTC) Permanency
The OBBBA makes the New Markets Tax Credit permanent.
Implication for Real Estate: Permanency for the NMTC provides long-term stability and greater certainty for investors and developers utilizing this credit. It is expected to lead to more sustained and impactful real estate projects aimed at economic revitalization in distressed communities, supporting a wide range of project types from commercial and industrial to community facilities.
Your Takeaway: Overall Real Estate Landscape
While the OBBBA includes various provisions that could influence real estate activity, its precise impact will be shaped by how investors and developers utilize these incentives, as well as by broader economic factors. The changes to business interest deductibility (163(j)) could alter financing strategies for highly leveraged real estate ventures. The emphasis on domestic manufacturing could drive demand for industrial properties, while the adjustments to affordable housing and community development tax credits may steer investment toward specific types of residential and mixed-use projects in targeted locations. The overall effect on the real estate industry will likely be a dynamic process, with different sectors experiencing varying degrees of influence based on specific provisions and market conditions.
Anthony Licavoli is the director of Rehmann’s tax consulting group, which boasts specialists with experience investigating and analyzing incentives for real estate developers and investors.
Mitri Homsi provides tax consulting services to clients in various industries. He regularly advises clients on entity restructuring, choice of entity, recapitalizations, entity conversions, mergers and acquisitions, partner buyouts, and private equity acquisitions. He boasts extensive experience providing tax planning services for limited liability companies, partnerships, S corporations, C corporations and individuals.
Please reach out to your Rehmann advisor or, or more information on these incentives, contact either CPA directly at [email protected] or [email protected].