When President Trump declared that Congress would pass “one big, beautiful bill” focused on tax reform, he may not have thought they would take him that literally; however, in July 2025 they passed the “One Big Beautiful Bill,” (OBBB) — a nearly 1,000-page tax act. For the Administration this was a priority, as the previous large-scale tax reform act, passed during the first Trump Administration (the Tax Cuts and Jobs Act of 2017) was set to expire at the end of 2025. The bill includes extensions of certain tax provisions, removals/expirations of others, and has some new items as well, all covering the full gamut of areas that tax law touches in the United States. So, how will it impact commercial real estate?
Tax changes can impact commercial real estate in ways both direct and indirect, and a sweeping tax bill like the OBBB certainly has that potential. Changes to individual tax rates may result in changes in spending, setting off trends that encourage (or discourage) retail or restaurants. Changes to how residential properties are taxed may impact where people are living and what they are investing in. This article focuses on some of the most direct and substantial ways the OBBB will affect the commercial real estate sector. Most of these changes will take effect in 2026, unless otherwise noted.
- Qualified Opportunity Zones: As covered in-depth in the last quarter’s SIOR report, the QOZ program has been made permanent by the OBBB, with its set deadlines removed and replaced by rolling ones based on when investments are made in the program. States will be able to begin re-designating Zones in 2026, and there is a renewed focus on investments in rural areas, with higher tax incentives for those who do so.
- Section 199A: Likewise, the Section 199A 20% Qualified Business Income Deduction is now permanent and expanded to include many pass-through businesses.
- Qualified Production Property Deduction: The OBBB includes a temporary, 4-year 100% expensing benefit for the construction of new factories. Eligible projects must have begun after January 19, 2025, be completed by the end of 2028, and be owner-occupied.
- Business Interest Deduction: OBBB increases the cap by allowing deductions for depreciation, amortization, or depletion to taxable income in adjusted taxable income.
- Bonus Depreciation: The bill reinstates and makes permanent the immediate expensing of the costs of equipment, machinery, leasehold improvements, and nonresidential interior improvements.
- State and Local Tax (SALT) Deduction: Those living in higher-tax states will see some relief, as the SALT deduction, which was limited to $10,000 for individuals in the TCJA, has been raised to $40,000 through 2029.
- 179D Deduction: The 179D Energy Efficient Commercial Buildings Deduction was expanded as part of the 2022 Inflation Reduction Act (IRA). IRA provisions were vulnerable to being cancelled as “pay-fors” in the OBBB, which is what happened to 179D. The provision will now sunset on June 30, 2026. To qualify for it projects will need to be 5% completed by that date.
As the federal agencies work through the rulemaking process to effectuate these changes, additional details regarding requirements and guidelines will be released. The National Association of Realtors will actively engage with these agencies and monitor developments to ensure REALTORS® receive timely, accurate information about how the tax changes will be implemented and how they may impact their businesses.