The One Big Beautiful Bill Act (OBBBA), signed into law July 4, 2025, is the most sweeping federal tax legislation since the 2017 Tax Cuts and Jobs Act. It introduces permanent enhancements to depreciation, expensing, credits, and individual provisions that affect companies of all sizes and high-net-worth taxpayers. Below is an overview of the key business and individual changes, followed by targeted considerations for commercial real estate firms.Â
Major Business Provisions
OBBBA introduces sweeping business tax reform measures designed to stimulate investment and economic growth across industries. These provisions ensure that businesses can leverage accelerated deductions and incentives on a permanent basis.Â
- 100% Bonus Depreciation Is Now Permanent: Qualifying property, including machinery, equipment, furniture and leasehold improvements, can be fully expensed in the year it’s placed in service. This change gives businesses immediate tax relief on capital investments instead of depreciating over several years.Â
- Expanded Section 179 Expensing: The maximum Section 179 deduction is indexed for inflation and now allows up to $1.22 million of property to be expensed in 2024, rising in future years. Companies should assess year-end purchase plans to capture the full deduction.Â
- Permanent Full Expensing of Domestic R&D: Domestic research and development costs may be fully deducted when incurred rather than capitalized and amortized, improving cash flow for innovators and tech-driven businesses. Â
- Interest Deduction Rules: The debt-financed interest limitation returns to an EBITDA-based threshold, potentially increasing deductible interest expense for leveraged companies. Businesses with significant borrowing should revisit debt structures and financing plans.Â
- Section 199A Qualified Business Income (QBI) Deduction: The 20 percent deduction for pass-through entity owners is now permanent. To maximize this benefit, ensure your entity classification, W-2 wage base and qualified property align with IRS guidance.Â
Key Individual Provisions
For individual taxpayers, OBBBA reinforces favorable tax rates and expands key deductions, particularly for high-net-worth filers. The act also provides enhanced planning opportunities by locking in exemptions and credits at levels not seen in previous decades.Â
- State and Local Tax (SALT) Deduction Increase: The SALT cap rises from $10,000 to $40,000 per return for tax years 2025 through 2029. High-income filers in states with elevated tax rates should revisit withholding and estimated payment strategies Â
- Excess Business Loss Rules: Permanent limitation on deductible business losses at the owner level remains in place. For 2025, joint filers may deduct up to $626,000 of net losses; single filers up to $313,000, with excess losses carried forward.Â
- Estate and Gift Tax Exemption: The lifetime exemption climbs to $15 million per individual ($30 million per married couple), indexed for inflation. Consider using gifting strategies while the exemption remains at historically high levels.Â
Commercial Real Estate Company Considerations
Commercial real estate owners face a distinct set of tax challenges and planning opportunities under OBBBA. By understanding how the act’s permanent and temporary provisions interact with real estate investments, firms can enhance cash flow, optimize financing, and defer gains effectively.Â
- Entity-Level QBI Optimization: Real estate partnerships and S corporations can leverage the 20 percent QBI deduction. Review rental income classifications, wage allocations and qualified property to fully realize this benefit.Â
- Accelerated Depreciation and Cost Segregation: With 100 percent bonus depreciation and elevated Section 179 limits, cost segregation studies are more valuable than ever. Reallocate basis from structural components to shorter-life assets to increase current-year deductions.Â
- 1031 Like-Kind Exchanges Intact: Deferral of capital gains through like-kind exchanges remains a cornerstone strategy. Incorporate 1031 planning into dispositions to preserve capital for new acquisitions without immediate tax consequences.Â
- Opportunity Zone Investments: The Qualified Opportunity Zone (OZ) program is now permanent, with an added rolling deferral mechanism and broadened eligible areas, including rural zones with enhanced step-up basis benefits. Commercial developers should evaluate OZ projects for both community impact and tax efficiency.Â
- Business Interest Expense: The limitation on deductible interest expense remains at 30 percent of adjusted taxable income but now incorporates depreciation, amortization and depletion in the calculation, offering potential relief for highly leveraged property portfolios.Â
As OBBBA provisions take effect, businesses and individuals that proactively adjust their strategies stand to benefit from enhanced deductions, credits and exemptions, and commercial real estate firms can drive significant cash flow improvements through accelerated depreciation, strategic 1031 exchanges, and opportunity zone investments. Staying informed and partnering with experienced advisors will be essential to unlocking the full value of both individual and business provisions while ensuring compliance in a complex tax environment.Â
