5 Ways the One Big Beautiful Bill Act Could Affect Commercial Real Estate

The One Big Beautiful Bill Act (OBBB), a nearly 900-page budget reconciliation bill, was signed into law by President Donald J. Trump on July 4. The megabill contains many tax provisions, some of which affect commercial real estate. Building owners and managers may notice these five impacts on the industry as a result of the bill.

1. Changes to the 179D Tax Deduction

OBBB amends the Energy Efficient Commercial Buildings Deduction (commonly known as Section 179D). Projects now must start construction by June 30, 2026, in order to be eligible for this tax deduction.

Section 179D was originally introduced in 2005 as part of the Energy Policy Act, according to KBKG. It incentivized commercial building owners to reduce energy use by implementing energy-efficient HVAC, interior lighting, and envelopes. It became a permanent part of the tax code in 2020 and was expanded by the Inflation Reduction Act of 2022 to allow higher deductions.

2. Clean Energy Tax Credits

OBBB terminates both clean energy production tax credits and clean energy manufacturing tax credits for wind and solar projects after 2027. It also imposes a penalty on new wind and solar projects that come online after 2027 unless those projects can cut prohibited foreign entities like China out of their supply chains, according to the Institute of Real Estate Management (IREM).

The bill also ends the electric vehicle tax credits after September and the residential solar tax credit after the end of 2025.

3. State and Local Tax Deduction (SALT)

The SALT deduction cap is set to expire at the end of 2025, IREM reports. OBBB raises the cap up to $40,000 (from $10,000) for incomes up to $500,000 through 2029. The cap will also be adjusted annually for inflation. OBBB also revived a tax loophole that allows pass-through entities to pay state and local taxes and deduct them, allowing individuals to avoid SALT caps.

4. Reinstatement of Bonus Depreciation

OBBB makes significant changes to how businesses can deduct capital investments. Bonus depreciation was set to phase out and drop to 40% in 2025 before OBBB was signed. The new law permanently reinstates 100% bonus depreciation for qualified property that is acquired and placed in service after January 19, 2025, said Meyer H. Levy of KLR’s Audit Services Group. The property affected includes most tangible property with a recovery period of up to 20 years, including land improvements, machinery, computers, furniture, and equipment.

“Businesses can now fully expense new and used assets in the year they are placed in service, rather than spreading deductions over several years,” Levy explained.

5. The Qualified Opportunity Zone Program

The Opportunity Zone program, established by the Tax Cuts and Jobs Act in 2017 during Trump’s first term, was intended to encourage investment in businesses that were located in low-income communities, according to Miller Canfield. Taxpayers who had capital gains could defer taxes by investing those gains in a Qualified Opportunity Fund, which would then invest in a Qualified Opportunity Zone Business that holds assets and conducts business in a Qualified Opportunity Zone. Real estate was an attractive investment under this program, Miller Canfield reports. Taxpayers who invested in a Qualified Opportunity Fund could defer capital gains until they sold their QOF investment and could potentially reduce the tax on this deferred gain if they held the investment for at least five years.

This program was set to terminate after Dec. 31, 2026. OBBB made the Opportunity Zone program permanent and requires states to designate new Qualified Opportunity Zones every 10 years, beginning on July 1, 2026. Like before, taxpayers who invest in a Qualified Opportunity Fund can defer taxes on capital gains for five years or until they dispose of their QOF interest, whichever happens earlier; if they hold their interest for five years, the taxable gain is reduced by 5%, potentially saving a significant amount of money for the investor.

The OBBB also created Qualified Rural Opportunity Zones, a designated low-income census tract that has fewer than 50,000 residents and isn’t contiguous with any area that has greater than 50,000 residents. Investments in these areas receive a 30% reduction in taxable gain rather than the 5% for urban zones.