10 Tax Provisions That Will Impact The Real Estate Industry
The One Big Beautiful Bill Act (OBBBA) was enacted into law on July 4, 2025. The new legislation extends and modifies certain provisions of the 2017 Tax Cuts and Jobs Act that were originally set to expire at the end of 2025. The OBBBA includes provisions that will affect real estate and high-net-worth property owners.
Below is a high-level breakdown of what real estate stakeholders need to know as it relates to OBBBA tax provisions affecting the real estate industry.
1. Bonus Depreciation
100% bonus depreciation for eligible property placed in service January 19, 2025, is permanently restored.
a. Qualified Production Property (QPP)
A new category of bonus depreciation eligible property for “production facilities” (nonresidential real property) is introduced. To be eligible for 100% bonus depreciation, QPP construction must start between 1/20/2025 and 12/31/2029, and the property must be placed in service in the U.S. before 1/1/2031.
2. Section 179
The maximum amount a taxpayer may expense under Section 179 is increased to $2.5 million for taxable years beginning after December 31, 2024, and the phase-down threshold is increased to $4 million, subject to certain limitations.
3. Section 163(j)
The calculation for the business interest expense limitation is modified by determining adjusted taxable income with reference to EBITDA (rather than EBIT), effective for tax years beginning after 2024. Interest capitalized to other assets will now have to be included in Sec 163(j) limitation calculation, effective for tax years beginning after 2025.
4. Section 174
The bill permanently restores the expensing of domestic research costs for tax years beginning after 12/31/2024. The bill will generally require taxpayers to implement the new treatment with an automatic accounting method change on a cut-off basis, but it offers two alternative transition rules.
5. Section 199A
Section 199A is made permanent at a rate of 20%, with an expanded phase-out amount for specific service trades or businesses, and a new minimum deduction of $400 for taxpayers with qualified business income of at least $1,000.
6. Opportunity Zones
The bill makes the opportunity zone program permanent and modifies the rules for investments made after 2026. For investments made after 2026, taxpayers will recognize deferred gains 5 years after the date of the investment, with a 10% basis step up. New zones will be designated in rolling 10-year designation periods for investments made after 2026. A new category of rural opportunity zones is created, providing a 30% basis step up on deferred gains. Both QOFs and QOZBs will be required to comply with substantial new reporting requirements.
7. Section 461(l) Losses
The legislation makes excess business losses permanent. The final bill struck an unfavorable provision in earlier drafts that would have required disallowed losses to remain in Sec 461(l) calculation in future years.
8. SALT Cap
The individual deduction for state and local taxes (SALT) will increase from the current $10,000 deduction to $40,000 beginning in 2025 and revert back to $10,000 in 2030. Subject to certain income limitations.
9. Pass-Through Entity Tax Deduction (PTET)
The deduction treatment for state and local taxes paid at the pass-through entity level is preserved.
10. 1099 Compliance
The de-minimis threshold for issuing information returns (such as Form 1099-MISC) is raised from $600 to $2,000.
For additional provisions contained in OBBBA, please refer to this GBQ article.
If you have questions about how this bill could impact you or your business, contact your GBQ advisor.
By A.J. Lewis, CPA, Tax & Business Advisory, and Azra Nakicevic, CPA, Tax & Business Advisory
Looking For More Insight Into The OBBBA? Check Out These Resources:
One Big Beautiful Bill Act Becomes Law
What Does The One Big Beautiful Bill Act (OBBBA) Mean For Research & Development (R&D) Costs?
One Big Beautiful Bill Act Includes Changes For Employee Benefits
