Policy Changes Shaping Real Estate Incentives
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, has transformed commercial real estate by introducing permanent tax incentives and reshaping investment strategies. Key highlights include:
- 100% Bonus Depreciation: Permanently reinstated for qualified property placed in service after January 19, 2025.
- Section 179 Expensing Limits: Doubled to $2.5 million, covering improvements like roofs and HVAC systems.
- Opportunity Zones: Now permanent, with added benefits for rural areas, including a 30% basis step-up.
- Energy Incentives: Section 179D deductions for energy-efficient buildings will expire for projects starting after June 30, 2026.
These changes encourage immediate action for developers, particularly for energy-related projects with tight deadlines. Tools like CoreCast simplify navigating these incentives by offering tax analyses, feasibility models, and deal pipeline tracking.
The act also expands affordable housing support, reduces bond financing requirements under the Low-Income Housing Tax Credit (LIHTC), and introduces tax advantages for redevelopment projects. Developers must act quickly to maximize benefits before certain provisions phase out.
OBBBA Tax Incentives Overview: Key Benefits and Deadlines for Commercial Real Estate
1. CoreCast
Impact on Commercial Real Estate Development
Navigating federal tax incentives can be tricky, especially with new policies in place. CoreCast simplifies the process by integrating updated tax incentives into feasibility models, making underwriting across various asset classes more efficient. It also tracks project pipelines, flagging opportunities that could benefit immediately from these incentives. This approach refines the analysis for targeted efficiency upgrades, saving time and resources.
Incentives for Energy Efficiency
The revised 179D deduction now extends to retrofits, covering expenses for energy-efficient building elements like envelopes, HVAC systems, and lighting [1]. If prevailing wage and apprenticeship standards are met, the deduction can increase by up to five times [7]. CoreCast’s portfolio analysis tools help pinpoint properties that are ideal candidates for these upgrades. Its reporting features also calculate potential deductions, ranging from $1.00 to $5.00 per square foot [7].
Support for Adaptive Reuse and Affordable Housing
CoreCast isn’t just about energy efficiency - it also supports creative redevelopment projects. Recent regulatory changes now allow federal tax credits to be combined, such as the ITC, Section 45L, and LIHTC [7]. For instance, in October 2023, the Treasury shared details about a project that transformed an underutilized commercial building into a 100-unit affordable multifamily development. By stacking multiple credits, the project earned $5,000 per unit [7]. CoreCast’s stakeholder tools and branded reporting features make it easier for investors to understand and leverage these incentive structures effectively.
2. One Big Beautiful Bill (OBBB) Policy Changes
Impact on Commercial Real Estate Development
The One Big Beautiful Bill Act, signed into law on July 4, 2025, has reshaped the tax framework for commercial real estate in significant ways [13]. One of the standout changes is the permanent reinstatement of 100% bonus depreciation for qualifying property placed in service after January 19, 2025 [8][11]. This adjustment halts the previously scheduled phase-down, which would have reduced the bonus depreciation rate to 40% in 2025. Now, developers can immediately and fully write off eligible assets.
"This change [100% bonus depreciation] reverses the previous phase-down schedule and re-establishes a powerful incentive for capital investment." – CSSI Services [8]
Additionally, businesses can now calculate taxable income using EBITDA under the enhanced Section 163(j) interest deductibility rules. A new 100% first-year depreciation deduction for Qualified Production Property further strengthens domestic manufacturing incentives [11]. These updates reflect a broader push to encourage investment and modernize tax incentives.
Incentives for Energy Efficiency
Changes in energy-related incentives are also a key part of the OBBB Act. The Section 179D Energy-Efficient Commercial Building Deduction will be repealed for projects starting construction after June 30, 2026 [9][10].
"The repeal of 179D compels managers to assess eligible assets promptly to secure tax benefits." – Cherry Bekaert [11]
Several residential energy credits are also being phased out. The Energy Efficient Home Improvement Credit (25C) and Residential Clean Energy Credit (25D) will no longer apply to property placed in service after December 31, 2025 [14]. Similarly, clean vehicle credits for new (30D), used (25E), and commercial (45W) vehicles will end for vehicles acquired after September 30, 2025 [14]. However, the ENERGY STAR program remains intact as a voluntary partnership [13].
On the upside, building owners can now fully expense clean energy projects, such as solar installations, in the year they are placed in service - whether or not they qualify for tax credits [13]. This shift from tax credits to immediate expensing reflects a broader move toward upfront financial benefits, aligning with other recent policy updates.
Support for Adaptive Reuse and Affordable Housing
In addition to tax depreciation benefits, the OBBB Act promotes redevelopment and affordable housing initiatives. The Act permanently extends both Opportunity Zones (OZ) and the New Markets Tax Credit (NMTC), giving investors confidence in long-term investments in underserved areas [8][11]. Opportunity Zone investments now offer a basis step-up of 10% in general and 30% in rural areas [11]. Furthermore, after 30 years, properties can have their basis stepped up to fair market value without requiring a sale [11].
The Low-Income Housing Tax Credit (LIHTC) has also been expanded. Most notably, the bond financing requirement was reduced from 50% to 25% of development costs, effective July 4, 2025 [9][11]. This change lowers barriers for developers, making affordable housing projects more achievable. Updates to the Percentage-of-Completion Method (PCM) further simplify planning for residential construction projects [11].
"The combination of permanent capital gains exclusion under OZ rules and enhanced LIHTC credits generates significant tax advantages." – Cherry Bekaert [11]
Additional provisions include an increased ownership limit for taxable REIT subsidiaries (TRSs), which rose from 20% to 25% of total asset value [11]. The estate and gift tax exemption was also increased to $15 million for individuals and $30 million for joint filers starting in 2026 [8][12]. Together, these measures create a more stable and financially appealing environment for commercial real estate, supporting a wave of policy-driven changes across the sector.
Trump's Big Beautiful Bill Impact on Commercial & Multifamily Real Estate
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Pros and Cons
The One Big Beautiful Bill (OBBB) Act introduces some game-changing tax benefits, but these come with tight deadlines that demand immediate attention. For starters, the act permanently restores 100% bonus depreciation for qualified property (with a 20-year life or less) acquired after January 19, 2025 [4][5]. Pair this with an increased Section 179 expensing limit of $2.5 million, and investors can quickly write off improvements like roofs, HVAC systems, and fire protection upgrades [2][15]. Additionally, the shift to EBITDA-based calculations under Section 163(j) raises the cap on interest expense deductions, making leveraged deals much more appealing [2][3]. However, these perks are tied to strict timelines, which could limit their overall impact.
One of the biggest challenges is the rapid phase-out of energy incentives. For example, deductions under Section 179D for energy-efficient commercial buildings will no longer apply to projects starting construction after June 30, 2026 [3][4]. Ben Reinberg, CEO of Alliance Consolidated Group of Companies, predicts a "retrofit boom in 2026–2027 as building owners scramble to add solar panels; new insulation; and heating, ventilation, and air conditioning (HVAC) upgrades before the credits disappear" [6]. This condensed timeline pressures developers to fast-track eligible projects to take advantage of the benefits.
On the plus side, the act also introduces measures that enhance long-term investment stability. The permanent Opportunity Zone program now includes Qualified Rural Opportunity Funds, offering a 30% basis step-up, compared to the standard 10% [3][15]. Meanwhile, the expanded Low-Income Housing Tax Credit, with bond financing requirements reduced from 50% to 25%, is projected to help finance around 1.22 million affordable homes over the next decade [3][5]. These provisions provide a reliable framework for investors targeting underserved markets.
Operationally, the act offers additional advantages for developers. Condominium developers, for instance, can now use the completed-contract accounting method, deferring income recognition until projects are finished. This avoids the issue of "phantom income" during construction, which, as noted by CohnReznick, "will likely help developers avoid phantom income and make financing easier for large development projects" [2][5]. On top of that, increasing the REIT TRS asset limit from 20% to 25% gives developers more flexibility in managing diversified portfolios [2][5].
In this evolving policy landscape, tools like CoreCast play a crucial role in helping developers navigate both immediate tax strategies and long-term planning. CoreCast offers integrated features like underwriting, pipeline tracking, and portfolio analysis, enabling users to model the impact of 100% bonus depreciation across various asset classes. It also helps identify properties that qualify before the June 30, 2026, deadline for energy incentives. Through cost segregation analysis, CoreCast isolates 5-, 7-, and 15-year assets eligible for immediate expensing. Its stakeholder center further simplifies collaboration by allowing teams to share time-sensitive tax strategies via branded reports.
Conclusion
The One Big Beautiful Bill Act marks a shift from temporary measures to lasting stability for commercial real estate. Aquiles Suarez, Senior Vice President for Government Affairs at NAIOP, described it as the industry's most significant win in decades[17]. Key provisions, like the permanent 100% bonus depreciation and EBITDA-based interest deductions, provide a solid foundation for long-term planning.
Timing is everything. With energy incentives set to expire on June 30, 2026, developers need to act quickly. Avi Jacob from EisnerAmper emphasizes this urgency:
"Now is the time to meet with your advisor to evaluate your portfolios for construction activity in 2025 or later"[4].
While immediate energy credits are a priority, broader tax reforms are reshaping long-term investment strategies. The permanent Opportunity Zone program, starting January 1, 2027, introduces rolling 10-year designations and enhanced benefits for rural investments. For instance, Qualified Rural Opportunity Funds now offer a 30% basis step-up - triple the standard 10% - highlighting a clear push toward underserved areas[19][16]. Additionally, a reduced 50% substantial improvement threshold for rural properties opens up new possibilities for investors.
For developers juggling multiple projects across asset classes, tools like CoreCast are invaluable. These platforms help with tasks such as cost segregation analysis, tracking construction timelines against regulatory deadlines, and modeling the effects of tax strategies across entire portfolios. This kind of infrastructure is essential for navigating complex timelines and maximizing both immediate and long-term opportunities.
To fully leverage these incentives, developers must take a proactive approach. Conducting cost segregation studies, reassessing debt structures under the new EBITDA rules, and auditing portfolios for Qualified Production Property eligibility before the 2029 construction deadline are all critical steps[18][4]. By doing so, they can secure significant tax benefits while building resilient and diversified portfolios.
FAQs
What are the deadlines to qualify for the new energy incentives under the OBBBA?
To qualify for the 45Y and 48E energy credits, construction must start no later than July 4, 2026. Furthermore, projects must be operational by December 31, 2027 to retain eligibility for these benefits. Missing these deadlines will result in losing access to the incentives.
What does the permanent reinstatement of 100% bonus depreciation mean for real estate investors?
The reinstatement of 100% bonus depreciation is a game-changer for real estate investors. It allows them to fully deduct the cost of qualifying property in the same year it’s put into service. This can greatly improve cash flow and adds even more value to strategies like cost segregation, helping investors fine-tune the timing of acquisitions and plan for the long haul.
With the ability to expense costs upfront, this policy lowers taxable income early in the investment process. That means more capital stays in your pocket, ready to be reinvested or used for other operational needs. For commercial real estate ventures, this tool becomes even more impactful when combined with a smart approach to acquiring and developing assets.
What recent changes have been made to Opportunity Zones, and how do they support rural communities?
The Opportunity Zone program has been solidified under the One Big Beautiful Bill Act (OBBBA), introducing a new feature: a decennial redesignation process. This means the designated areas will be reviewed and updated every ten years to better align with evolving economic priorities.
To draw more investment into rural areas, the legislation has launched the Qualified Rural Opportunity Fund and introduced improved tax incentives. These include longer deferral periods and extra exclusions on capital gains. The goal? To make investing in underserved rural communities more appealing, sparking much-needed economic growth and development in these regions.