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On July 4, 2025, Congress passed the One Big Beautiful Bill (OBBB), bringing sweeping changes to the U.S. tax code and revitalizing several key provisions that directly impact the commercial real estate sector. For property owners, developers, and investors, these tax updates are more than just numbers on paper — they represent significant tax planning opportunities that can enhance cash flow, boost ROI, and streamline long-term investment strategies.
Key Tax Provisions Affecting Commercial Real Estate
100% Bonus Depreciation is Now Permanent
Perhaps the most significant news for the real estate industry is the permanent extension of 100% bonus depreciation. Originally introduced in the 2017 Tax Cuts and Jobs Act (TCJA), this provision allows property owners to fully expense qualified improvement property (QIP) and other eligible assets placed in service after Jan 19, 2025.
For commercial property owners, this translates to immediate and substantial tax deductions for building improvements such as interior renovations, HVAC systems, security systems and more.
Enhanced Section 179 Expensing Limits
In addition to bonus depreciation, the OBBB raises Section 179 expensing limits, giving businesses greater flexibility to deduct the full purchase price of qualifying equipment and property improvements. This is a critical incentive for small-to-mid-sized businesses aiming to reinvest in their facilities without deferring tax benefits over multiple years.
SALT Deduction Expansion
For investors and property owners in high-tax states, the temporary increase of the State and Local Tax (SALT) deduction cap to $40,000 through 2029 is a major planning opportunity. Taxpayers with an Adjusted Gross Income (AGI) under $500,000 can leverage this expanded cap to offset state and property tax liabilities more effectively.
Cost Segregation + Bonus Depreciation = Powerful Tax Savings
Cost segregation studies continue to be a strategic tool in maximizing the benefits of bonus depreciation. By accelerating the depreciation schedule of building components (such as electrical systems, flooring and cabinetry) into five, seven or 15-year categories, property owners can significantly enhance first-year tax deductions.
Case Study Highlights:
Fast Food Restaurant: First-year tax benefit of $243,296
Office Building: First-year tax benefit of $343,306
Apartment Complex: First-year tax benefit of $3,440,123
Car Dealership: First-year tax benefit of $617,220
(Read full case studies here: CSSI Case Studies)
Missed Bonus Depreciation? There’s Still Time
If you failed to take bonus depreciation in a prior year, you might still be able to correct it. In many cases, a cost segregation study can be applied retroactively through an accounting method change (Form 3115), allowing you to capture missed deductions without amending past returns.
Action Items for 2025 Tax Planning
Schedule a Cost Segregation Study: Identify assets eligible for accelerated depreciation.
Reassess Equipment & Improvement Purchases: Utilize bonus depreciation and Section 179 for 2025 investments.
Maximize SALT Deductions: Prepay property taxes are beneficial to bundle itemized deductions.
Consult Your CPA: Ensure you’re structured to take full advantage of the OBBB provisions.
Our Take
The One Big Beautiful Bill offers a renewed opportunity for commercial real estate owners to strategically enhance their tax positions. With 100% bonus depreciation now a permanent fixture and cost segregation delivering proven results, property owners who act early can significantly improve cash flow and reinvest in their assets more efficiently.