The Senate’s version of the “One Big Beautiful Bill” proposes a range of permanent tax code changes and programmatic revisions with direct implications for commercial real estate market participants.
Several provisions relate directly to real estate ownership and operations, which seek to alter the tax code to make CRE investments more attractive. The bill restores full expensing and 100% bonus depreciation, allowing businesses to deduct eligible capital investments in the year incurred. The 20% Qualified Business Income (QBI) deduction under Section 199A is made permanent with an expanded phase-in range, which may affect the taxation of passthrough real estate entities. Key tax treatments relevant to property dispositions and investment returns, including Section 1031 like-kind exchanges, carried interest, mortgage servicing rights deferral, and capital gains rates, were preserved.
The legislation also modifies several housing-related tax provisions, including Low-Income Housing Tax Credit (LIHTC) and Opportunity Zones (OZ). The LIHTC is a federal subsidy program that incentivizes private equity investment in affordable rental housing, which would be expanded under the OBBB. LIHTCs provide a tax credit equal to 4 or 9%1 of a project’s qualified construction or rehabilitation costs (excluding land) each year for 10 years2. The bill permanently increases the allocation of the 9% LIHTC and reduces the required share of development costs financed with tax-exempt bonds to qualify for 4% LIHTCs from 50% to 25%. Essentially, this makes it easier for affordable housing developers to access tax credits, potentially enabling more projects to reach feasibility.
Source: Senate’s ‘One Big Beautiful Bill’: CRE Tax Wins Clouded by Rising Rate Pressures
