One Big Beautiful Bill –

1. Bonus Depreciation: Back and Better Than Ever

The reinstatement of 100% bonus depreciation is the headliner here. If you’ve been in the game for a while, you know how powerful this tool can be. The bill allows investors to immediately deduct the full cost of qualifying tangible property placed into service after the beginning of President Trump’s 2nd term – January 19, 2025. Bonus depreciation has been around for almost the entirety of this century in some form, most recently increased to 100% by the 2017 TCJA. However, the benefits began to phase out beginning in 2023, reducing by 20% each year. For 2025, bonus depreciation was slated to be only 40%, meaning the OBBB significantly enhanced this feature with the permanent increase.

We have seen many conflicting reports regarding a new phase out schedule to begin in 2030 as the bill also addressed bonus depreciation for “Qualified Production Property (QPP)” or nonresidential real property used in certain manufacturing, production, or refining activities within the U.S. This incentive is meant to drive onshoring during the current administration and will begin phasing out at the end of the decade.

2. Opportunity Zones: More Flexibility, More Upside

Opportunity Zones were first introduced in the previously mentioned 2017 TCJA and designed to encourage investment in state-deemed economically distressed communities. Investors could temporarily defer capital gains until 2026 or disposal by investing in a Qualified Opportunity Fund. Similarly to bonus depreciation, benefits derived from Opportunity Zones were set to expire; however, the OBBB made several updates to this incentive package to sustain it. Key changes include:

• Permanent Extension: The OZ program is now permanent with the passage of this bill, eliminating the original sunset date at the end of 2026.
• New Zones: Current eligible zones have been locked in since the TCJA inception. The OBBB will allow states to propose new OZs every 10 years beginning in 2027.
• Focus on Rural Investment: The OBBB creates Qualified Rural Opportunity Funds (QROFs) with enhanced tax benefits to encourage investment in rural areas. To qualify as a QROF, at least 90% of a fund’s assets must be invested in rural OZs.
• Permanent Basis Step-Up: The OBBB permanently establishes a 10% basis step-up for investments held for at least five years. The basis step-up could be as high as 30% for rural investments.
• New Rolling Gain Deferral: For investments made after December 31, 2026, deferred gains will be recognized on the fifth anniversary of the investment date, rather than on a fixed date.
• New Reporting Requirements: The OBBB introduces detailed reporting requirements for Qualified Opportunity Funds (QOFs) and Opportunity Zone businesses to improve oversight and transparency.

OZs were already a great tool for deferring gains, but the changes implemented via the OBBB make them even more attractive for HNWIs. The bill’s tweaks could unlock better risk-adjusted returns without forcing investors to rush their exit strategies.

3. Low-Income Housing Tax Credit (LIHTC): A Nod to Affordable Housing

The bill makes notable improvements to the LIHTC program, which is a boon for investors in multifamily or mixed-use projects with an affordable housing component:

• The 4% credit’s qualifying threshold for bond financing is permanently lowered from 50% to 25%, making it easier to access.
• The 9% credit allocation is increased by 12.5%, providing more funding for affordable housing developments.

Affordable housing has always been a niche with strong fundamentals—consistent demand, stable cash flows, and government-backed incentives.

4. SALT Cap Relief: A Temporary Boost

While not exclusive to real estate investors, the SALT cap relief is worth noting. The 2017 TCJA capped state and local tax deductions at $10,000, hitting residents of high-tax states like New York, California, and New Jersey hard. The OBBB raises the cap to $40,000 for 2025–2029 (phasing out above $500,000 income), before reverting to $10,000 in 2030.

5. QBI Deduction: A Business Incentive

Another noteworthy item not exclusive to real estate is the permanent extension of the Qualified Business Income (QBI) deduction. QBI was also introduced in the TCJA and allows pass-through businesses to deduct 20% of their qualified business income. QBID was set to expire in 2025 prior to the extension.

Final Take

Scroll through social media or watch the news and it’s clear that plenty of folks have hot takes on the One Big Beautiful Bill, but for real estate investors, it’s welcomed good news. That 100% bonus depreciation is a needed reprieve for an industry feeling the brunt of high interest rates. Does it fully offset the current lending climate? No way. But does it help? Absolutely. It’s not what you earn—it’s what you keep, and this bill’s tax perks definitely have the potential to deliver. While each investor’s situation and goals are different, it is important to be knowledgeable and understand how this could impact your investments.
If you have any questions regarding the One Big Beautiful Bill and how it impacts the Excelsior strategy, please don’t hesitate to reach out. Contact Us