📣 The 2025 Tax Shake-Up: How the "One Big Beautiful Bill" Is Reshaping Real Estate Investment

Matt Maupin
Jul 15, 2025
3 min read

Just before the July 4th deadline, a sweeping piece of legislation—the One Big Beautiful Bill Act—was signed into law, ushering in one of the most significant tax overhauls since the 2017 Tax Cuts and Jobs Act.

For commercial real estate investors, the impact is massive.

While the headlines have focused on politics, the bigger story is this: many of the most powerful tax strategies for real estate investors are now permanent fixtures in the U.S. tax code.

If you invest through syndications, partnerships, or private equity structures—or if you’re a developer navigating a capital-constrained environment—this tax law could materially improve your returns, tax liability, and long-term strategy.

🧠 What Changed: Codified Tax Breaks = Certainty for Investors

The new legislation doesn’t just extend tax breaks—it locks them into law. That creates long-term predictability for structuring deals, managing capital, and optimizing after-tax yield.

✅ Permanently Codified Provisions:

100% bonus depreciation (expanded to real estate assets through 2029)
Qualified Business Income (QBI) deduction for pass-through entities
Low-Income Housing Tax Credit (LIHTC) expansion and permanence
Preservation of 1031 exchanges and carried interest treatment

📉 These changes provide a clear edge for real estate vs. other asset classes. They also give investors a path to navigate tighter spreads and elevated borrowing costs by boosting tax-efficiency and shielding more income.

🏗️ Bonus Depreciation Supercharged for Real Estate

One of the biggest wins for CRE: 100% bonus depreciation now applies to certain qualifying real estate assets, compressing decades of depreciation into a single year.

🔧 Example: A logistics or multifamily developer installing HVAC, lighting, or storage infrastructure can now deduct those capital costs immediately—potentially turning millions of dollars into upfront tax write-offs.

⚠️ Note: Properties must remain operational for at least 10 years to avoid IRS clawbacks.

🏘️ Affordable Housing and LIHTC Get a Major Boost

The LIHTC program, one of the key financing tools for affordable housing, just got its most significant expansion in 25 years:

Cuts the “50% test” to 25%, allowing more projects to qualify
Makes the funding permanent
Unlocks the development pipeline for affordable housing in cities like NYC, Chicago, and Miami
Permanently allocates $5B/year to the New Markets Tax Credit program
This creates more opportunity for investors looking to combine mission-driven capital with tax-advantaged returns.

🧱 Opportunity Zones: Extended and Updated

Originally set to sunset in 2026, the Opportunity Zone (OZ) program is now permanently part of the tax code—but with revised guidelines:

Tighter qualification rules (tracts must be ≤70% of area median income)
No more adjacent-zone loopholes
5-year rolling deferral window replaces the original sunset clock
OZ funds now required to file annual returns; Treasury must report to Congress

💬 According to Economic Innovation Group, this permanence gives OZs a stronger foundation—but new incentives won’t fully kick in until 2027, which may cause a temporary slowdown in new OZ investments.

🔋 Energy-Efficiency Incentives Eliminated

Not every CRE sector saw wins. The bill phases out Section 179D, which previously allowed up to $5/SF in tax deductions for energy-efficient retrofits in commercial buildings.

Also rescinded:

Remaining funds from the Green and Resilient Retrofit Program for multifamily housing
Tax credits for wind and solar projects not breaking ground by 2026
These rollbacks may dampen ESG-aligned capital strategies and slow down planned upgrades in aging buildings, data centers, and high-energy-use facilities.

🎓 Endowment Taxes May Cool University-Linked CRE

The bill introduces steep new taxes on university endowments, scaling as high as 8% for institutions with more than $500K per student. Foreign students are excluded from the denominator—further driving schools into higher brackets.

With schools like Harvard and the University of Houston already pausing real estate commitments, this could reduce funding, leasing, and development activity tied to higher education.

🏥 REIT Adjustments

A modest but notable change: REITs can now hold up to 25% of their assets in taxable REIT subsidiaries, up from 20%. This adds flexibility for REITs offering specialized services (e.g., in hospitality, healthcare, or data center operations).

🔍 Investor Implications: Tax Strategy is No Longer Optional

This legislation reinforces a core principle of high-level investing: Taxes are not a footnote—they’re a strategic lever.