The One Big Beautiful Bill (OBBB) Act, signed into law on July 4, 2025, extended many provisions of the Tax Cuts and Jobs Act of 2017 and made several additional changes to the Internal Revenue Code. The bill includes several provisions that impact real estate investors.
Expensing and Depreciation (Section 168(k))
One of the largest effects of the OBBB is that 100% bonus depreciation has been made permanent.
This allows taxpayers to immediately expense 100% of the cost of qualifying business property (generally, with a recovery period of 20 years or less) acquired after January 19, 2025.
It is worth noting that the ability to immediately expense 100% bonus depreciation pairs well with a cost segregation study. You can read about the benefits of cost segregation here.
Qualified Production Property (QPP) (Section 168(n))
The OBBB introduced Section 168(n), establishing the framework for QPP and the associated 100% immediate expensing for qualifying real property. QPP is any portion of nonresidential real property (real estate) located in the United States used as an integral part of a “qualified production activity,” which means manufacturing, production or refining tangible personal property. Construction must begin after January 19, 2025, and before January 1, 2029; the property must be placed in service before January 1, 2031.
Qualified Business Income Deduction (Section 199A)
The 20% deduction for pass-through income and real estate investment trust (REIT) dividends has been made permanent. The Qualified Business Income (QBI) deduction was due to expire for tax years beginning after December 31, 2025.
Business Interest Deduction (Section 163(j))
The OBBB restores and makes permanent the EBITDA-based limitation (30% of earnings before interest, taxes, depreciation and amortization) for deducting business interest. This applies for tax years beginning after December 31, 2024. The exception for electing real property trade or business is preserved, but new rules now require capitalized interest to be included in applying the limitation, and disallowed interest must be allocated first to such capitalized interest.
State and Local Tax Deduction (SALT)
For tax years before 2030, the SALT deduction cap has been raised to $40,000 ($20,000 for married filing separately). The new SALT deduction is subject to phaseout rules based on income. The $40,000 cap begins to phase out for taxpayers with a modified adjusted gross income (MAGI) exceeding $500,000. For every dollar of MAGI exceeding $500,000, the deduction is reduced by $0.30. Certain planning methods (pass-through entity tax regimes) are still available for business income.
Excess Business Losses
The cap on noncorporate taxpayers’ ability to deduct excess business losses is made permanent and indexed for inflation. Losses above the threshold can continue to be carried forward as net operating losses.
Qualified Opportunity Zones and Tax Credits
Qualified Opportunity Zones (QOZs) are made permanent, with rolling 10-year designations and reinforced eligibility criteria (targeting rural and lower-income areas). Investments may benefit from enhanced step-ups in basis, especially for rural QOZs. The new rules for opportunity zones take effect January 1, 2027.
Estate and Gift Tax Exemption
Starting January 1, 2026, the basic federal estate, gift and generation-skipping transfer tax exemption is permanently increased to $15 million per individual (from $13.99 million in 2025), and $30 million for married couples. This figure will be indexed for inflation in future years. With the higher exemption, real estate owners can pass significantly more of their property holdings on without incurring federal estate or gift tax.
Need Help?
The OBBB will have a large impact on real estate investors, affecting the timing of both investments and purchases. Contact us online or call 800.899.4623 to discuss tax planning opportunities for your real estate business.
