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In 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA), overhauling parts of the Tax Cuts and Jobs Act. The bill presents permanent and temporary tax changes with implications for real estate developers, investment funds, and small business owners. Key changes include the permanent extension of the 20% qualified business income deduction, 100% bonus depreciation for qualified property, a permanent limit on excess business losses, reinstatement of depreciation and amortization add-backs, increased state and local tax deduction cap and changes to the Qualified Opportunity Zone program among others.
President Trump Signs H.R. 1, Introducing Numerous Tax Changes
President Trump signed a major overhaul of numerous tax provisions from the Tax Cuts and Jobs Act (TCJA) into law on July 4, 2025. This law, also known as the One Big Beautiful Bill Act (OBBBA), introduces significant permanent and temporary tax changes with wide implications for real estate developers, investment funds, and small business owners.
The key real estate-related provisions of the new law, including how they affect current law, are summarized below.
Enhancement of IRC Sec. 199A
The OBBBA makes the 20% QBI deduction introduced by the TCJA a permanent feature. There is also a new $400 minimum deduction if taxpayers have at least $1,000 in QBI.
Extension of 100% Bonus Depreciation
The bonus depreciation phase-out schedule under the TCJA has been eliminated by the OBBBA, effectively making the 100% bonus depreciation permanent for qualifying property.
Special Depreciation Allowance for Qualified Production Property
The OBBBA adds IRC Sec. 168(n), permitting 100% depreciation for non-residential real property that qualifies as qualified production property (QPP).
Increase in IRC Sec. 179 Expensing Limits
The OBBBA raises the expensing limit under IRC Sec. 179 from $1.0 million to $2.5 million and the phase-out threshold from $2.5 million to $4.0 million.
Restoration of Depreciation, Amortization, and Depletion Add-Back for IRC Sec. 163(j)
The OBBBA restores the depreciation, amortization, and depletion add-back to taxable income in the computation of a taxpayer’s ATI for tax years beginning after December 31, 2024.
Permanent Limitation on Excess Business Losses
The OBBBA removes a proposal that would have permanently restricted excess business losses, instead deferring these losses for one year and allowing them to be carried forward as part of an NOL in the following year.
Continuation of Carried Interest
Despite calls from President Trump to end the carried interest “loophole,” the OBBBA retains longstanding partnership tax laws that reward risk-taking.
Extension of Limitation on Deduction for Qualified Residence Interest
The OBBBA makes the $750,000 cap on acquisition debt and the disallowance of interest deductions on home equity loans used for personal expenses permanent.
Termination of Miscellaneous Itemized Deductions
The OBBBA makes certain Miscellaneous Itemized Deductions permanently non-deductible.
Increase in State and Local Tax Deduction Cap
The OBBBA temporarily increases the SALT deduction limitation to $40,000 for the 2025 taxable year.
No Limitations on Pass-Through Entity Tax Workarounds
The OBBBA preserves the current treatment of state pass-through entity tax workarounds without imposing additional limitations.
Deferral of Income for Condominium Developers
The OBBBA allows developers of condominium buildings to defer income recognition until the contract is substantially completed.
Modification of the Qualified Opportunity Zone (QOZ) Program
The Qualified Opportunity Zone (QOZ) program has been permanently extended under the OBBBA, with new stricter eligibility criteria for QOZ designations.
Affordable Housing Credit Expansion
The OBBBA permanently increases the 9% Low-Income Housing Tax Credit (LIHTC) allocation by 12%, effective beginning in 2026.
Clean Energy Tax Incentives
The OBBBA makes significant changes to many of the clean energy credits included in the Inflation Reduction Act of 2022 (IRA).
Elimination of Proposed IRC Sec. 899 (Revenge Tax)
Following negotiations with other G7 nations, a proposed IRC Sec. 899 allowing retaliatory taxes on foreign entities was removed from the final version of the OBBBA.
Changes to REIT Taxable REIT Subsidiary (TRS) Asset Test
The OBBBA raises the threshold for the aggregate value that TRSs (Taxable REIT Subsidiary) can represent from 20% to 25% of a REIT’s gross assets, beginning with taxable years after December 31, 2025.
1099-MISC and 1099-NEC Reporting Threshold Increased
The OBBBA raises the reporting threshold to $2,000 per payee for businesses, effective for payments made beginning in 2026.
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