The newly passed One Big Beautiful Bill Act delivers significant tax reforms that are especially favorable to commercial real estate (CRE) investors. With permanent and expanded incentives, the Act enhances after-tax returns, improves financing efficiency, and opens opportunities in new markets. Below is a breakdown of the key provisions and their implications.
100% Bonus Depreciation – Now Permanent
One of the most impactful changes is the permanent extension of 100% bonus depreciation. Investors can now immediately expense all qualifying property improvements in the first year, rather than depreciating them over many years. This makes value-add and improvement-heavy strategies far more attractive.
- Investors can deduct 100% of qualifying improvements in year one, indefinitely.
- Applies to items like tenant improvements, building systems, and equipment.
- Example: A $1M property upgrade can be fully deducted in the first year, significantly increasing after-tax returns.
- Encourages faster ROI on renovation and redevelopment projects.
Section 179 Expensing – Expanded
The Act doubles the Section 179 expensing limit, providing greater flexibility for small and mid-sized investors to write off capital expenditures. This is especially valuable for owner-users and smaller operators reinvesting in their properties.
- Deduction limit increased from $1.25M to $2.5M.
- Phase-out threshold raised to $4M.
- Covers improvements like roofs, HVAC systems, fire protection, and alarm systems.
- Provides more room to reinvest while maximizing tax efficiency.
Interest Deduction – More Room to Leverage
Financing has become more attractive under the Act, as the new rules expand the ability to deduct interest expenses. By shifting to an EBITDA-based limit, investors using leverage can reduce taxable income more effectively.
- Deduction limits are now tied to EBITDA rather than EBIT.
- Increases deductibility of interest for leveraged transactions.
- Encourages strategic use of debt to grow property portfolios.
- Enhances overall tax efficiency of financed deals.
Opportunity Zones – Permanent & Expanded
Opportunity Zones (OZs) have been a popular program, and the Act strengthens them by making the incentive permanent and broadening eligibility. The expansion into rural markets lowers entry barriers and creates new avenues for investment.
- Opportunity Zones are now a permanent tax incentive.
- Rural OZs require lower improvement thresholds, making them more accessible.
- Opens opportunities in underdeveloped markets with both growth potential and tax advantages.
- Provides investors with greater flexibility and more time to maximize returns.
What This Means for the Market
The One Big Beautiful Bill Act establishes a friendlier tax environment for CRE investors. With permanent depreciation benefits, expanded expensing, more favorable financing rules, and stronger OZ incentives, the market is positioned for growth and redevelopment.
- Faster ROI on property improvements.
- Greater ability to finance and leverage deals.
- Expanded opportunities in rural and underserved markets.
- Likely to stimulate investor demand and long-term sector growth.