Due to stubbornly high mortgage rates, a greater share of international home buyers paid cash—47% compared to 28% among all buyers.
Another important provision in the OBBBA raises the SALT deduction cap from $10,000 to $40,000 for taxpayers earning less than $500,000, effective from 2025 to 2029, before reverting to $10,000 thereafter.
Leasing activity surged this quarter to over 360,000 square feet, a 45% increase from the first quarter of this year, with renewals representing 57% of executed transactions.
Another important provision in the OBBBA raises the SALT deduction cap from $10,000 to $40,000 for taxpayers earning less than $500,000, effective from 2025 to 2029, before reverting to $10,000 thereafter.
On July 4, 2025, President Donald J. Trump signed into law the One Big Beautiful Bill Act (“OBBBA”) [see https://www.congress.gov/bill/119th-congress/house-bill/1/text], a sweeping tax reform package that significantly reshapes the U.S. Tax Code, with notable implications for the real estate industry. Passed by the House of Representatives on May 22, 2025, and later amended by the Senate, the OBBBA extends and enhances several provisions from the 2017 Tax Cuts and Jobs Act, while introducing new incentives aimed at stimulating investment, development and affordability in real estate. This article provides a comprehensive summary of the key provisions in the OBBBA that directly relate to and benefit the real estate sector.
The National Association of Realtors remained actively involved in negotiating with the White House to have important provisions included in the OBBBA [see http://bit.ly/44SSyOO]. According to NAR, it “remained at the negotiating table through the final hours.” NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn stated that they “were invited to the White House just days before the final (Senate) vote to continue advocating for our members and consumers.” McGahn further stated that “The administration and Congress respect the voice of our members and the roles they play as leaders in their communities. We are an army of advocates living and working in every ZIP code in America with a unique insight into the state of the economy.” Some of the key provisions advocated by NAR were:
The OBBBA permanently reinstates the deduction for private mortgage insurance (PMI) premiums as qualified residence interest, effective for tax years after Dec. 31, 2025. PMI premiums on acquisition debt for primary or second homes (up to $750,000 mortgage debt) are deductible if taxpayers itemize deductions. The deduction phases out for higher earners, likely starting at $100,000 AGI (exact thresholds to be confirmed by the IRS). This covers PMI premiums from private insurers and federal programs (e.g., FHA, VA, RHS) for mortgages issued on or after Jan. 1, 2007. This deduction directly benefits lower and middle-income homeowners, especially first-time buyers, but does require itemization and is subject to income phase-outs. The IRS will issue further guidance clarifying the requirements for 2026 and future years.
Another important provision in the OBBBA raises the SALT deduction cap from $10,000 to $40,000 for taxpayers earning less than $500,000, effective from 2025 to 2029, before reverting to $10,000 thereafter. This increase benefits homeowners in high-tax states like New York, New Jersey and California, where property taxes are significant. By allowing larger deductions for state and local taxes, the enhanced SALT provision allows for more affordability for buyers who purchase homes with significant real estate tax burdens, increasing higher demand and price appreciation in these markets.
The OBBBA bolsters the Low-Income Housing Tax Credit (LIHTC) program, which supports the construction and preservation of affordable housing. For the period 2026 to 2029, the 9% LIHTC is restored to its 2021 level with a 12.5% allocation increase. For the 4% LIHTC, the bond-financing threshold for projects is lowered from 50% to 25% for bonds issued between 2025 and 2030. Additionally, Tribal and rural areas are designated as Difficult Development Areas, increasing credit eligibility. These changes are expected to expand the supply of affordable housing in DDAs, addressing a critical need in the U.S. housing market, particularly for lower-income renters.
The OBBBA also makes permanent the Section 199A deduction for qualified business income (QBI), which was originally introduced in the TCJA and set to expire after 2025. This deduction, available to pass-through entities such as partnerships, S corporations, and sole proprietorships, has been increased from 20% to 23%, reducing the effective federal tax rate to as low as 28.49%. For real estate professionals, particularly those operating through real estate investment trusts (REITs) or pass-through entities, this enhanced deduction provides significant tax savings, boosting after-tax income and encouraging further investment in both residential and commercial properties.
The legislation also expands the QBI deduction to include dividends from electing business development companies, treated as regulated investment companies, further broadening its applicability. Additionally, the OBBBA replaces the complex phase-out rules for W-2 wages, capital investment, and specified service trade or business (SSTB) limitations with a simplified two-step framework for taxpayers above certain income thresholds, making the deduction more accessible.
The OBBBA raises the maximum amount taxpayers can expense under IRC Section 179 from $1.25 million to $2.5 million, with the phase-out threshold increased from $3.13 million to $4 million, both indexed for inflation starting in 2026. This provision allows real estate developers and investors to deduct the cost of qualifying tangible personal property and certain real property improvements in the year they are placed in service, up to these higher limits. This change is expected to stimulate development activity by reducing the tax burden on capital-intensive projects, such as renovations and equipment purchases for commercial properties.
The OBBBA also extends and enhances the Qualified Opportunity Zone program, originally set to expire, by launching a second round from 2027 to 2033. The QOZ Program incentivizes investment in economically distressed areas by offering tax deferrals and potential exclusions on capital gains. Key enhancements include a narrower definition of low-income communities, a requirement that at least 33% of opportunity zones be rural, and a 30% step-up in basis for rural Qualified Opportunity Zone Funds after five years. These changes make the program more attractive for real estate investors focusing on underserved areas, potentially driving development in rural and low-income urban communities.
One of the most significant provisions for real estate investors is the reinstatement of 100% bonus depreciation under Internal Revenue Code Section 168(k). Under prior law, bonus depreciation was set to phase down to 40% in 2025 and expire entirely by 2027. The OBBBA restores full expensing for qualified property, such as equipment, machinery, and certain building improvements, acquired and placed in service after Jan. 19, 2025, and before Jan. 1, 2030. This allows real estate developers to immediately deduct the full cost of qualifying renovations and property improvements, significantly improving cash flow and incentivizing capital investment in commercial and residential real estate projects.
Additionally, the OBBBA introduces a new elective 100% depreciation allowance for “Qualified Production Property” under IRC Section 168(n). QPP includes non-residential real property used in manufacturing, production or refining of tangible personal property in the U.S., provided construction begins between Jan. 20, 2025, and Dec. 31, 2028, and the property is placed in service by Dec. 31, 2032. This provision is particularly beneficial for investors in logistics, warehousing and industrial facilities, as it creates a powerful tax advantage for developing or upgrading such properties.
The OBBBA also preserves several longstanding provisions that have been critical to the real estate industry. The following are some of the key provisions:
The OBBBA introduces temporary deductions that will serve to support homeownership and consumer spending. Consumers and homebuyers are now allowed a deduction of up to $10,000 annually for interest on auto loans for vehicles assembled in the U.S (covering the period from 2025 through 2028). This may indirectly stimulate housing demand by easing financial pressures on households. Additionally, the OBBBA allows for a deduction for qualified tip income (up to $25,000) and overtime pay (up to $12,500) for the period covering 2025 through 2028. Again, these deductions are likely to benefit service industry workers who may be prospective homebuyers.
The OBBBA’s provisions collectively create a favorable environment for real estate investors, developers and professionals. The restoration of 100% bonus depreciation and the introduction of QPP deductions incentivize capital investment in commercial and industrial properties, while the enhanced QBI deduction and increased Section 179 limits reduce tax liabilities for pass-through entities and developers. The extension of Qualified Opportunity Zones and LIHTC enhancements promote development in underserved areas, addressing both economic and housing needs. The increased SALT deduction, though temporary, will support real estate demand and ultimately benefit buyers and property values.
The One Big Beautiful Bill Act represents a significant win for the real estate industry, offering several tax incentives that enhance cash flow, reduce tax burdens and stimulate investment. By making permanent and expanding key provisions like the QBI deduction, bonus depreciation, and Qualified Opportunity Zones, while preserving critical mechanisms like 1031 exchanges, the OBBBA provides certainty and opportunities for growth.
As always, real estate professionals and consumers should consult with their legal and tax advisors to optimize strategies around these provisions, particularly given the immediate or retroactive effect of many changes starting in 2025. As the industry navigates this new tax landscape, the OBBBA is poised to drive significant activity in commercial, industrial and affordable housing sectors, reinforcing the real estate industry’s role as a cornerstone of economic growth.
Legal Column author John Dolgetta, Esq., is the principal of the law firm of Dolgetta Law, PLLC. For information about Dolgetta Law, PLLC and John Dolgetta, Esq., please visit http://www.dolgettalaw.com. The foregoing article is for informational purposes only and does not confer an attorney-client relationship and shall not be considered legal advice. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views or positions of HGAR, its affiliates, or any other entity.
Due to stubbornly high mortgage rates, a greater share of international home buyers paid cash—47% compared to 28% among all buyers.
Leasing activity surged this quarter to over 360,000 square feet, a 45% increase from the first quarter of this year, with renewals representing 57% of executed transactions.
The One Big Beautiful Bill Act includes multiple NAR-championed provisions designed to support homeownership, drive investment in housing supply, and strengthen the real estate economy.
The report noted that in Westchester County, the luxury segment remains particularly strong, with significant buyer activity in the $2-million-and-above category.
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