U
.S. President Donald Trump signed the One Big Beautiful Bill Act into law on July 4, a nearly 900-page budget reconciliation legislation that extends provisions from the 2017 Tax Cuts and Jobs Act affecting commercial real estate. The bill reinstates bonus depreciation and extends the Qualified Opportunity Zone Program, while also incorporating affordable housing incentives, including a significant expansion of the Low-Income Housing Tax Credit (LIHTC) program.
The law makes major cuts to wind and solar incentives, but experts see positives in what was not included, such as no changes to Section 1031 exchanges or the pass-through entity tax workaround for personal SALT deductions. The bill's impact on commercial real estate is mixed, with some provisions expected to boost investment and development.
The reinstatement of bonus depreciation could free up capital and make marginal deals financially viable, while the expansion of LIHTC may lead to tens of thousands of new affordable housing units. However, the loss of block grants and government workers who administer and review developments within affordable housing programs is a concern.
Experts note that what's not in the bill is also significant, as it avoids major negative impacts on the real estate industry, such as increased taxes on carried interest or a retaliatory tax on inbound investment. The passage of the One Big Beautiful Bill Act boosts commercial real estate by combining long-term tax incentives with targeted tools aimed at development, investment, and renewal across various property types.
The legislation introduces changes in four key areas: investment expensing rules, small business deduction thresholds, revitalization incentives, and capital gains treatment. Full expensing through bonus depreciation of equipment investment is made permanent, allowing landlords to immediately deduct improvements such as interior buildouts, lighting, and HVAC, boosting profitability and likely spurring more investment.
Affordable housing financing becomes more accessible, with the LIHTC and New Markets Tax Credit made permanent, and the bond financing threshold for 4 percent LIHTC deals lowered from 50 percent to 25 percent. Targeted incentives aimed at boosting investment and revitalization in the retail and hospitality sectors are also included.
The bill's permanence of policies will enable commercial real estate investors to develop longer-term strategies that more effectively capitalize on the policies and programs created, driving several long-run trends, including increased construction of affordable housing, development and renewal in distressed areas, and active investment and value-add redevelopment.
