Time to Start Unpacking – July 14, 2025

For commercial real estate in particular, the One Big Beautiful Bill Act covers a lot of ground

Not quite as lengthy as War & Peace, the final version of the One Big Beautiful Bill Act (OBBBA) signed by President Trump covers in its own way about as much ground across 900-plus pages as the Tolstoy classic. And just as Tolstoy’s novel can be interpreted from a variety of vantage points, so can the OBBBA. For commercial real estate investors in particular, there’s a lot to unpack, even if not all of it is new. 

“The newly passed ‘One Big Beautiful Bill’ Act extends core elements of the 2017 Tax Cuts and Jobs Act while codifying several key tax provisions into permanent law, including 100% bonus depreciation, the Qualified Business Income deduction and Low-Income Housing Tax Credits,” Marcus & Millichap says in a special report. “The legislation provides measured support rather than dramatic stimulus, yet reinforces real estate’s tax-advantaged status by preserving established tools like 1031 exchanges and carried interest treatment.  

“By making many provisions permanent, the legislation creates a more stable framework for long-term tax planning and investment allocations,” the report states. “The policy timing is particularly favorable for commercial real estate, as tax benefits can help investors manage higher borrowing costs.” 

The Marcus & Millichap analysis delves into the CRE implications of the OBBBA and also summarizes key provisions. From a real estate standpoint, these include the following: 

• Bonus Depreciation: Restored to 100% and made permanent for assets placed in service after Jan. 19, 2025.  

• Manufacturing Incentives: Restores full R&D expensing, provides deductions to support facility development, and authorizes direct investment in defense-related manufacturing.  

• Low-Income Housing Tax Credits: Permanent 12% increase in allocation and reduced bond test for LIHTC development.  

• Opportunity Zones: Made permanent, with a 10% basis step-up after five years, effective starting in 2027.  

• State and Local Tax (SALT) Deductions: Raised from $10,000 to $40,000; expires in 2030, phases out for incomes above $500,000.  

• Qualified Business Income (QBI): Made permanent at 20%.  

• Estate and Gift Tax Exemptions: Raised to $15 million (single) / $30 million (joint).  

• Clean Energy Rollback: Repealed deductions for efficiency upgrades and rescinded unobligated funds. 

On the subject of bonus depreciation, a note from consulting firm Albee & Associates points out that it’s not a standalone provision. “Many investors are surprised to learn that Section 179 [of the tax code] should typically be applied before bonus depreciation. The reason? Section 179 offers annual deduction limits that reset each year, making it particularly useful for offsetting taxable income on current-year acquisitions or improvements.” 

The final version of the OBBBA raises the annual Section 179 deduction limit to $2.5 million, with phase-outs beginning at $4 million for property placed in service after Dec. 31, 2024. This increase greatly expands “the opportunity for real estate investors making qualifying improvements,” according to Albee & Associates. 

Investment isn’t the only CRE-related activity that may be enhanced by the OBBBA. Developers may also reap benefits, specifically in the industrial sector, according to an Avison Young report. 

“The recent passage of the One Big Beautiful Bill Act of 2025 … introduced new provisions allowing 100% rapid depreciation not only of equipment, but also of production and manufacturing facilities,” the report states. “This is a notable expansion beyond the 2017 Tax Cuts and Jobs Act (TCJA), which limited this benefit to equipment alone.  

“By broadening the scope of eligible assets, the legislation aims to catalyze domestic production, reshape supply chain dynamics, and significantly reduce effective corporate tax rates,” says Avison Young. “As a result, it is expected to spark a wave of industrial development across the country.” 

CRE may benefit from omissions as well as inclusions. One provision of OBBBA that didn’t pass muster was the so-called “revenge tax” targeting countries that the administration believes impose unfair or discriminatory taxes on U.S. companies and individuals. The tax potentially would have decreased foreign investment in the U.S., said law firm Wachtell, Lipton, Rosen & Katz.

“The provision was dropped as a result of negotiations with the G7, which agreed in principle to seek to exempt U.S.-parented groups from certain aspects of the OECD’s global minimum tax framework,” according to Wachtell Lipton. 

The Real Estate Roundtable worked to eliminate the “revenge tax” from the final OBBBA bill, along with limitations on state and local tax deductions for pass-through businesses. “This legislation represents a meaningful step toward strengthening communities, expanding housing opportunities, and supporting long-term economic growth,” said Jeffrey DeBoer, president and CEO of the Roundtable. “By advancing policies that encourage investment and preserve small business tax parity, Congress is helping to revitalize neighborhoods, create jobs, and ensure all Americans benefit from a stronger built environment.” 

The bill has its downsides, though. “We are, of course, disappointed that the overall bill is predicted to increase the deficit and national long-term debt,” DeBoer added. “However, we hope that the pro-growth aspects of the bill will narrow both by significantly growing the economy and providing revenues greater than those now projected.  Likewise, we are concerned with predictions by some regarding the impact of spending cuts on research and needed healthcare for Americans.” 

There will be more coverage of the OBBBA on Connect CRE and on its sister website, Connect Money. Stay tuned.