The One Big Beautiful Bill Act (OBBBA) encompasses a broad range of tax provisions that will impact individuals, businesses, and estates. Several of these measures are directly relevant to real estate investors, influencing how income is taxed, how quickly costs can be recovered, and how properties can be transferred to heirs.

 Accelerated Depreciation and Expensing

The OBBB temporarily includes a 100 percent expensing of qualifying structures known as qualified production property. Construction would need to begin between January 19, 2025, and December 31, 2029, and ensure placement in service before January 1, 2031.  This provision would allow investors to deduct the entire cost of an eligible building. The first year, rather than over its standard depreciation schedule. Only certain nonresidential structures would qualify, so it is essential to review your specific situation.

100 percent bonus depreciation for short-lived assets, such as certain equipment and building improvements, has been restored. Both measures reduce taxable income in the early years of ownership, affecting cash flow and investment recovery timelines.

Permanent Section 199 Qualified Business Income (QBI) Deduction

The Section 199A (QBI) deduction—which was set to expire—would become permanent. This allows eligible pass-through entities, such as LLCs and partnerships common in real estate, to deduct up to 20 percent of their qualified business income (QBI).

The provision increases the income phase-in range for the deduction and establishes a minimum $400 deduction for active participants with at least $1,000 in QBI. These adjustments expand eligibility and standardize the benefit for smaller operators.

Mortgage Interest and SALT Deduction Rules

The bill makes the mortgage interest deduction cap of $750,000 permanent. This affects the amount of interest that can be deducted on acquisition indebtedness for primary and secondary residences.

Taxpayers will see the state and local tax (SALT) deduction cap temporarily raised to $40,000 in 2025, with a 1 percent annual increase through 2029. The provision would begin to phase out at incomes above $500,000 for taxpayers. After 2029, the cap would return to $10,000. These changes may impact the net housing expenses of certain property owners, especially those in high-tax states.

Estate and Gift Tax Exemption

Beginning in 2026, the estate and lifetime gift tax exemption will be permanently enacted at $15 million for individuals and $30 million for couples, indexed for inflation. For real estate investors, this provision would determine the property value that is eligible to be transferred to heirs without incurring federal estate tax.

Indirect Economic Effects

While not specific to real estate, other provisions in the bill may have secondary effects on the market:

• Lower individual income tax rates and expanded standard deductions could increase disposable income, potentially influencing housing demand.
• Business investment incentives, such as immediate expensing of domestic R&D and capital improvements, could encourage commercial development in certain sectors.

In Summary

The One Big Beautiful Bill contains several measures that could boost real estate investment returns. Several key highlights include accelerated cost recovery for buildings, the permanence of the QBI deduction, stable mortgage interest rules, and an increased estate tax exemption. While the overall impact would depend on project timing, ownership structure, and location, these provisions collectively shape the tax environment in which real estate investments operate.

Contact Us Today

New tax provisions may offer valuable advantages for real estate investors. Call us at 203-489-0612 to explore how these changes could strengthen your investment strategy.

Written by: Kristin Rygielski