The One Big Beautiful Bill Act: What it Means for Real Estate Tax Incentives

The One Big Beautiful Bill Act (OBBBA) introduces expansive updates to the tax code, many of which directly impact real estate developers, investors, and owners. These changes --ranging from the permanent reinstatement of 100% bonus depreciation to the imminent sunsetting of certain energy incentives – will require strategic and timely implementation. 

As many provisions are effective retroactively, taxpayers should consult their tax advisors on these changes now, both to identify immediate opportunities and avoid missing out on time-sensitive benefits.  

100% Bonus Depreciation Reinstated 

The OBBBA permanently reinstates 100% bonus depreciation from the Tax Cuts and Jobs Act (TCJA) for qualified property acquired and placed in service on or after January 20, 2025. A taxpayer election to take 40% bonus in lieu of 100% is available for the first tax year ending after that date. 

Key Considerations 

• “Physical work” is defined under general IRS guidance as the point at which construction activities of a significant nature begin. Under the IRS safe harbor, this is satisfied when more than 10% of the total project cost has been incurred. 
  
  
• Cost Segregation Studies will become extremely powerful, as 100% bonus depreciation significantly enhances the value of front-loaded asset classifications (e.g., 5-, 7-, and 15-year property). 

Qualified Production Property (QPP) with Temporary 100% Bonus  

The OBBBA creates a new property classification: Qualified Production Property (QPP). This is defined as the portion of U.S. non-residential real property used in a qualified production activity (manufacturing, producing, or refining of tangible personal property that is substantially transformed). Only the manufacturing-use portion of the facility qualifies. Areas such as office space, parking, and retail/sales are excluded. 

Newly constructed QPP will be temporarily eligible for 100% bonus depreciation if:  

• Construction commences between January 20, 2025, and December 31, 2029 
• The QPP is placed-in-service before January 1, 2031 

Acquired QPP may also be eligible for 100% bonus depreciation if:  

• Acquisition occurs between January 20,2025, and December 31,2029 
• The QPP is placed-in-service before January 1, 2031 
• The property has not been used in qualified production activity by anyone between January 1, 2021, and May 12, 2025 
• The current taxpayer has never used the property 

Key Considerations 

• 100% bonus-eligible QPP is a tremendous benefit for domestic manufacturers, further boosting the impact of a Cost Segregation Study
   
• Engineering support with domain experience in industrial and production environments will be required to identify and isolate QPP-eligible components accurately – choosing the right partner is key
   
• 100% bonus on QPP is temporary, and the election should be made on a timely filed return – manufacturers should not delay  

Section 179 Expensing Limits Significantly Increased 

In a win for small and medium-sized businesses, the OBBBA has materially expanded Section 179 expensing limits: 

• Deduction Limit: Increased to $2.5 million 
• Phase-out Threshold: Increased to $4 million

Qualifying assets include company necessities like office furniture and computers, but also include improvements to the following systems in a non-residential building:  

• Qualified Improvement Property (QIP) 
• Roofs, HVAC systems, and fire protection systems 

Key Considerations 

• The enhanced thresholds make Section 179 a more viable tool for commercial real estate owners with moderate-scale improvements, especially when QIP or mechanical system replacements are involved. Modeling the interplay between 179 and bonus depreciation can optimize outcomes based on taxpayer-specific limitations. 
  
  
• Many states do not conform to bonus depreciation, which may make Section 179 a more attractive option for some companies 
  
  
• Keep in mind that Section 179 cannot be used to create or increase a tax loss, and the property must be used in an active trade or business.
  
  
• Upon request, EisnerAmper Cost Segregation reports can include a Section 179 Expensing module  

Acclerated Expiration of Energy Incentives 

Several energy-related provisions are scheduled to sunset under OBBBA, creating urgency for real estate professionals: 

• Section 179D Energy-Efficient Commercial Buildings Deduction 
  • Applies to commercial and multifamily buildings (4+ stories) 
  • Sunsets for properties beginning construction after June 30,2026 
    
    
• Section 45L Energy-Efficient Home Credit 
  • For new single- and multi-family homes 
  • Sunsets for dwelling units acquired after June 30, 2026 
    
    
• Section 30C Alternative Fuel Refueling Property Credit 
  • For EV recharging stations  
  • Sunsets for property placed-in-service after June 30, 2026 
    
    
• Sections 48/48E Investment  and Clean Electricity Investment Credits  
  • For renewable solar and wind systems 
  • Sunsets for projects placed-in-service after December 31, 2027  

Key Considerations 

• Construction timelines must be evaluated now to determine whether projects can realistically begin -- or be completed -- within required windows 
  
  
• Energy modeling and certification services (for Sections 179D and 45L) should be coordinated in tandem with design timelines 
  
  
•  These deadlines are critical for making sure incentive eligibility is not lost due to delays in breaking ground or securing materials 

Conclusion: Now is the Time  

The OBBBA introduces significant opportunities across bonus depreciation, manufacturing asset expensing, Section 179, and energy-related tax benefits. But many provisions are time-sensitive, and real estate professionals must proceed with one eye on the calendar.  

Now is the time to meet with your advisor to evaluate your  portfolios for: 

• Construction activity in 2025 or later 
• Manufacturing-related real estate development 
• Planned capital expenditures on qualifying improvements 
• Energy-efficient or renewable energy projects that can meet timing thresholds 

Contact our team today to schedule a consultation and develop a strategic plan for your real estate portfolio under the One Big Beautiful Bill Act.