As our One Big Beautiful Bill Act (OBBB) Act blog series continues, this post takes a closer look at how the legislation impacts the real estate industry. From bonus depreciation and QBI enhancements to updates on interest expense limitations and energy credits, the bill delivers several key provisions that real estate professionals should know.
Accelerated Bonus Depreciation
The OBBBA permanently restores 100% bonus depreciation for qualified property placed in service on or after January 19, 2025. This includes fixed assets with a useful life of 20 years or less, reversing the scheduled phase-out under the Tax Cuts and Jobs Act (TCJA).
In addition, the bill introduces a new asset class: Qualified Production Property (QPP). This includes non-residential real estate used in manufacturing, production, or refining. To qualify:
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Construction must begin after January 19, 2025, and before January 1, 2029
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Property must be placed in service before January 1, 2031
Eligible QPP, such as factories and build-to-suit facilities, can now be fully expensed—opening new opportunities for tax planning and capital investments.
Section 199A Qualified Business Income (QBI) Deduction
The 20% QBI deduction is now permanent, effective December 31, 2025, with enhancements that benefit actively managed real estate entities:
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Expanded phase-in ranges:
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Single filers: $75,000 above the income threshold ($197,300 for 2025)
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Married filing jointly: $150,000 above the threshold ($394,600 for 2025)
(Both indexed for inflation; previously $50,000 / $100,000 under TCJA)
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Minimum deduction floor:
Taxpayers who materially participate under Section 469(h) are guaranteed a minimum $400 deduction, provided their aggregated active QBI is at least $1,000.
These updates aim to preserve the benefit for smaller-scale real estate investors and operators.
Section 163(j) – Interest Expense Limitation Reform
Two significant reforms to Section 163(j) take effect for taxable years beginning after December 31, 2024:
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ATI Calculation Reversion:
Adjusted Taxable Income (ATI) will again be based on EBIDA—Earnings before Interest, Depreciation, and Amortization—rather than the more restrictive EBIT method. This expands ATI and allows greater interest deductibility. -
Ordering Rule Change:
Previously, interest subject to capitalization under Sections 263A(f) or 263(g) was applied before the 163(j) limitation. OBBBA reverses this, applying 163(j) first, potentially reducing capitalized interest and creating carryforwards for large projects.
Combined with 100% bonus depreciation and the EBIDA-based limit, these changes reduce the need for the real property trade or business election, which often triggers longer ADS schedules.
Energy Efficiency Incentives: 45L & 179D Phase-Out
While credit values remain unchanged, OBBBA shortens the eligibility window:
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45L – New Energy-Efficient Home Credit
$2,500–$5,000 per qualified unit
Homes must be acquired by June 30, 2026 -
179D – Energy-Efficient Commercial Building Deduction
$0.54–$5.81 per sq. ft.
Construction must begin by June 30, 2026
Developers and builders should plan accordingly to ensure project timelines align with these new deadlines.
Qualified Opportunity Zones (QOZ)
The OBBBA also introduces notable updates to the Opportunity Zone program. For a deeper dive into these changes, see our dedicated post by Trent Baeckl: The OBBBA’s Impact on Opportunity Zones.
Most of the OBBBA’s tax reforms are business-friendly, and real estate is among the sectors poised to benefit the most. If you have questions or would like to explore how these changes may impact your tax strategy, please reach out to your Perkins advisor or visit our Real Estate Services page.