The One Big Beautiful Bill Act (OBBB), signed into law on July 4th, introduces a range of updates—some welcome, some more complex—for real estate developers, investors, and property owners. Below is a summary of the key tax provisions that are likely to impact the real estate sector.

QBI Deduction Made Permanent: One of the most significant updates is the permanent extension of the 20% Qualified Business Income (QBI) deduction, originally introduced under the 2017 Tax Cuts and Jobs Act. This is a major benefit for many real estate professionals, as a broad array of real estate-related activities typically qualify. Making the deduction permanent brings added certainty and allows for more effective long-term planning.

100% Bonus Depreciation Returns: Beginning January 20, 2025, qualifying property placed in service will once again be eligible for 100% bonus depreciation.  This includes assets like qualified improvement property (QIP), land improvements, equipment, furniture, and fixtures. OBBB makes this benefit permanent, with no end dates or phase-out periods. The return of full first-year depreciation provides a substantial tax advantage and further enhances the benefits of cost segregation studies, which can help reclassify assets to maximize depreciation deductions.

Business Interest Deduction Rules Revised: OBBB also revises the limitation on business interest expense deductions under Section 163(j), shifting the calculation back to an EBITDA basis (earnings before interest, taxes, depreciation, and amortization). This change allows taxpayers to deduct more interest expense since depreciation and amortization are no longer included in the income base used to calculate the 30% limitation. This is particularly helpful in real estate, where these non-cash expenses can be significant. Real estate businesses still have the option to elect out of these limitations altogether.

Clean Energy Incentives Phasing Out: Several clean energy tax incentives—including Sections 179D and 45L—are set to expire on June 30, 2026. These provisions have supported energy-efficient building projects and may have played a role in developers’ sustainability and tax saving strategies. With these incentives winding down, project economics may need to be reevaluated.

Opportunity Zones Program Extended: The Qualified Opportunity Zone (QOZ) program, originally set to sunset in 2026, is now permanent. The updated program includes the creation of Qualified Rural Opportunity Funds and new compliance and reporting rules, many of which will go into effect starting January 1, 2027. In the meantime, there are still valuable planning opportunities under the current rules.

Pass-Through Entity Tax (PTET) Deduction untouched: The Act did not alter the SALT workaround for business owners, preserving a valuable tax planning opportunity for real estate businesses and their owners.

The One Big Beautiful Bill Act brings lasting changes to the real estate tax landscape. While many favorable provisions have been extended or made permanent, others—such as clean energy incentives—are being phased out. These updates may affect your planning, investment decisions, and overall tax strategy.

At Snyder Cohn, we’re here to help you navigate these changes, adjust your strategies as needed, and identify new opportunities in the evolving tax environment.

 

By: Billy Litz and Dustin Cutlip