One Big Beautiful Bill ACT

What it means for CRE

What Happened

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, culminating his longstanding campaign promise of extending the 2017 Tax Cuts and Jobs Act (TJCA). The OBBBA introduces several additional changes, particularly relevant to the CRE sector, which we will outline in detail.

Is it big and beautiful…for the economy?

One thing is for sure: the OBBBA is certainly big, with over 870 pages for anyone looking to brave some legalese reading. As for whether or not it qualifies as “beautiful,” well, that remains a matter of perspective. When it comes to the economy, however, there are a few important things to consider:  

• Most baseline forecasts anticipated an extension of the TCJA, resulting in minimal impact on projected growth. That said, the consensus appears to be that the level of real GDP will be 0.5% to 1% higher in 2027-2028, when the stimulative impacts of the bill are at their peak. 
• Over time, the GDP impact declines as backloaded spending cuts lead to higher government deficits, which creates marginal upward pressure on longer-term bond yields. The Congressional Budget Office estimates the cost of the bill to be $3.4 trillion, which will cause the deficit-to-GDP ratio to swell from 117% under current law to 130% over the next decade.  
• Because the consensus forecast already included an assumption that the TCJA would be extended, the passage of OBBBA does not materially change the current outlook for the economy. Growth is expected to decelerate as the toll of tariffs and broader trade uncertainty take hold. However, without the extension of the TCJA (assuming no OBBBA or alternative could be legislated), steep tax hikes for businesses and individuals would have been triggered, resulting in significant economic headwinds and further uncertainty, and possibly even a recession. The fact that OBBBA is now final is good news for businesses and households who now have greater clarity on government tax and spending policy. 
• There are winners and losers within the OBBBA, but for CRE investors, the impact is likely to be a small net positive for the economy and investment environment over the next few years.  
• Tax cuts will be a positive for most corporate firms and U.S. consumers. But for occupiers in certain industries, the benefits will be offset with challenges from spending cuts. Healthcare firms that rely on funding via Medicaid, for example, will face the most pressure, but even that will take a few years to ramp up.  
• Geography also plays a significant role, as states with higher shares of Medicaid enrollees could face greater economic strain. Similarly, regions that have benefited from green energy investments could face setbacks if tax credits are rolled back under OBBBA.  
• On the other hand, high-tax states and localities are relative winners from the increase in SALT deduction caps from $10,000 to $40,000. Assuming this results in lower tax burdens, which is expected, there is likely to be some localized stimulative effect. 
• Designed to boost domestic manufacturing, the OBBBA includes provisions such as production tax credits, investment tax incentives, and grants aimed at encouraging U.S.-based manufacturing.

Important Provisions for CRE 

The OBBBA legislation introduces several tax code modifications that make commercial real estate investment more financially attractive and operationally flexible. 

Capital Gains & Income Tax Provisions: 

• Capital gains tax rates remain favorable at 15% and 20% for most investors, with an additional 3.8% surtax for high earners (income above $394,600 for married couples filing jointly in 2025). 
• Like-kind exchanges (Section 1031) are preserved, enabling investors to defer capital gains tax by reinvesting in new property. 

Depreciation and Equipment Expensing: 

• Full expensing and 100% bonus depreciation have been restored retroactively to January 19, 2025, now made permanent. This allows businesses to deduct eligible capital investments immediately, substantially reducing first-year tax liability and improving liquidity. 
• Section 179 expensing limits for equipment write-offs increased to $2.5 million, encouraging new renovations and upgrades. However, the phase-out of energy-efficient tax credits may limit some retrofits, especially in older buildings. 

Business Income & Tax Credit Enhancements: 

• Real estate investors may now deduct up to 20% of their qualified business income, reducing overall taxable income. 
• The Opportunity Zones (OZ) program is now permanent. States may designate new OZs beginning in 2026, with income thresholds lowered from 80% to 70% of area median income. Additional incentives are introduced for investments in rural areas. 
• The Low-Income Housing Tax Credit (LIHTC) is also made permanent, with a 12% funding increase and a significant reduction in the tax-exempt bond financing requirement from 50% to 25%, enabling funds to support a greater number of affordable housing developments. 
• The New Markets Tax Credit (NMTC) program, offering a 39% credit over 7 years for qualifying equity investments in low-income communities, has been made permanent after initially set to expire in 2025. 

Construction Accounting Flexibility: 

• The legislation expands eligibility for the completed contract method (CCM) for residential contractors building more than four units, starting January 1, 2026. Contractors are no longer required to use the percentage completion method (PCM), allowing income recognition at substantial completion. This timing shift offers improved cash flow management and tax planning flexibility. 

Sustainability Measures Rolled Back: 

• Tax incentives for energy-efficient investments are being phased out. Additionally, Energy Star reporting, a widely-used benchmark for assessing energy efficiency, is also being eliminated.