Key Real Estate Elements in One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA), signed into law by the President on July 4, 2025, is set to introduce several changes to the American tax law, extending and making permanent various provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) which were due to expire. One of the sectors that will be significantly affected by these changes is the real estate sector. This article provides a summary of some key provisions of the OBBBA that are likely to impact the real estate sector.

For those interested in how these changes will affect their interests, they can seek advice from their GampS attorney or contact the Tax Group.

Income Tax Rates

The OBBBA has made permanent the ordinary income tax rates applicable to individuals introduced by the TCJA, retaining a 37% top marginal rate. However, there have been no changes made to the capital gains rate. More details on how the OBBBA affects individuals, including considerations about charitable giving and estate and gift taxes can be found here.

Bonus Depreciation

A key provision in the OBBBA is the permanent extension of 100% bonus depreciation for qualified and new tangible property with a recovery period of 20 years or less. This provision, which does not apply to non-residential real property, residential rental property, and qualified improvement property for taxpayers with a real property business electing out of the 30% limitation on interest deductions, will take effect after January 19, 2025.

Qualified Production Property

The OBBBA introduces an election that allows taxpayers to expense costs associated with building nonresidential real property used to manufacture tangible personal property. However, this election only applies to newly constructed manufacturing facilities located in the United States, whose construction begins after January 19, 2025, and before January 19, 2029, and are in service before January 1, 2031.

Business Interest Limitation

Since 2022, Section 163(j) of the Internal Revenue Code, established under the TCJA, has limited business interest expense deductions to 30% of adjusted taxable income (ATI). However, the OBBBA has returned to the pre-2022 standard by adding back depreciation and amortization to the calculation of ATI. This allows taxpayers to deduct interest subject to a limitation of 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA). Implications of the OBBBA on financing transactions can be found here.

SALT Deduction Cap

A temporary increase in the State and Local Taxes (SALT) deduction cap from $10,000 to $40,000 beginning in 2025 has been introduced by the OBBBA. From 2026, the cap will increase by 1% annually until 2030 when it reverts to $10,000.

Qualified Business Income Deduction

The OBBBA makes the qualified business income deduction under Section 199A permanent, allowing non-corporate taxpayers to deduct up to 20% of their qualified business income.

REITs

The OBBBA relaxes the REIT asset test with respect to taxable REIT subsidiaries (TRSs) to provide that a REIT cannot hold securities in one or more TRSs representing more than 25% (up from 20%) of the REIT’s value. This change applies to taxable years beginning after December 31, 2025.

Qualified Opportunity Zones

The OBBBA permanently extends and updates the qualified opportunity zone (QOZ) program. More information about the changes to the QOZ program can be found here.

Low-Income Housing Tax Credits

The OBBBA increases by 12% the State housing ceiling applicable to the allocation of 9% low-income housing tax credits for calendar years beginning after December 31, 2025.

Phase Out of Certain Green Building Incentives

The OBBBA makes numerous changes to the clean energy incentives introduced by the Inflation Reduction Act of 2022.

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