The One Big Beautiful Bill Act (OBBB) is officially as of July 4, 2025, and with it comes significant changes that impact the real estate industry. The OBBB includes several attractive incentives for developers, investors and property owners; however, some incentives like deductions and credits tied to energy efficiency will phase out next year. The following are top key provisions from the OBBB that greatly impact the industry, including opportunities and challenges.
100 Percent Bonus Depreciation: Permanently Reinstated
The OBBBA permanently reinstates 100 percent bonus depreciation for qualifying property placed in service after Jan. 19, 2025, which allows investors to immediately deduct the full cost of short-lived assets, such as furniture, equipment, lighting and flooring, in the year they are placed in service. Investors have an opportunity to significantly reduce taxable income in the first year of ownership, thereby improving cash flow and making capital-intensive projects more financially viable.
Section 163(j): Interest Deduction Flexibility Restored
The OBBB restores the EBITDA-based limitation for business interest deductions under Section 163(j), reversing the EBIT-based limitation that had been in place since 2022. Real estate entities with significant non-cash expenses, e.g., depreciation, can now deduct more interest and potentially improve the economics of leveraged deals.
Section 179 Expensing: Expanded Limits
The OBBB increases the Section 179 expensing limit to $2.5 million, with a phase-out threshold of $4 million, both indexed for inflation. Businesses can therefore immediately expense the cost of qualifying improvements to nonresidential real property, such as security systems, roofs and energy-efficient upgrades. Mid-sized real estate portfolios benefit the most from this provision, especially when combining Section 179 with bonus depreciation to boost their tax efficiency tied to renovation-heavy projects.
Section 179D: Extended Only Through 2026
The Section 179D deduction, which incentivizes energy-efficient construction and retrofits in commercial buildings, has been extended, but only through June 30, 2026. The maximum deduction has also increased to $5.81 per square foot. To qualify, projects must meet energy performance thresholds and comply with prevailing wage and apprenticeship requirements. The Section 179D extension should encourage real estate developers to prioritize sustainability in both new construction and renovations, but they must act quickly to qualify before the mid-2026 expiration.
Section 45L: Residential Energy Credit Terminated
The Section 45L credit offers up to $5,000 per residential unit for new or substantially renovated homes that meet DOE Zero Energy Ready Home (ZERH) standards, but the credit will expire for qualified property acquired (i.e., rented or sold) after June 30, 2026.
Strategic Tax Planning: Urgency Meets Opportunity
The OBBB’s provisions collectively create a more favorable tax environment for real estate professionals. Because the bill enables immediate expensing, enhances energy incentives and restores interest deduction flexibility, the bill seeks to encourage both capital investment and sustainable development.
But with the temporary nature of key incentives like Sections 179D and 45L, urgent and proactive planning is critical. Developers and investors should take time to meet and discuss their tax strategy with their trusted team of advisors early in the lifecycle of their projects to fully and effectively leverage available opportunities.
Windham Brannon’s Real Estate Practice professionals are poised and ready to help you make the most of your real estate investments through the new and changed provisions from the OBBB. For questions or more information about the OBBB’s impact to your unique tax situation, please contact your Windham Brannon tax advisor today, or reach out to Micah Greenberger.
