Big Wins, Smart Timing: What the New Tax Law Means for Real Estate Investors and Developers

How the OBBBA is Reshaping Cost Segregation and Energy Incentives

The new “One Big Beautiful Bill Act” (OBBBA) is changing the tax landscape in meaningful ways -- and if you're in real estate, this legislation could dramatically reduce your tax liability and improve project cash flow.

Here’s how three standout provisions — 100% bonus depreciation, Qualified Production Property (QPP), and the 179D Deduction — can drive real estate strategy forward.

100% Bonus Depreciation is Back — Permanently

100% bonus depreciation is officially back for assets placed in service on or after 1/20/2025 -- and this time, it’s permanent.

Why It Matters:

• Immediate write-offs on qualified property like land improvements, short-lived building components, and equipment

• Huge cash flow impact for new construction, acquisitions, and renovations

• Ideal for front-loading depreciation through a cost segregation study.

Timing is Key:

Activity	Triggering Date	Bonus Rate
New construction	Physical work started on/after 1/20/2025	100%
Acquisition	Written Binding Contract signed on/after 1/20/2025	100%
Older Projects	Started/signed before 1/20/2025	40% (2025), 20% (2026)

Want to take a more measured approach this year? Taxpayers can elect 40% bonus depreciation instead — allowing for longer-term depreciation planning.

The restoration of 100% bonus is an important development for real estate taxpayers.  If you’re considering building, acquiring, or renovating commercial or residential rental property, now is the time.

Qualified Production Property (QPP): A Manufacturing Win  

The OBBBA established Qualified Production Property (QPP), a powerful new incentive for owners of manufacturing and production facilities.

Traditionally, only tangible personal property and/or land improvements could be fully expensed under bonus depreciation. But – for a limited time -- parts of the building designated as QPP can qualify for 100% bonus depreciation. 

What Qualifies as QPP?

QPP includes any portion of U.S. non-residential real estate used directly in:

• Manufacturing

• Production (agriculture or chemical)

• Refining

Only parts of the building directly used in manufacturing activity may be considered QPP.  Offices, parking, storage, retail spaces, or software/data centers within a manufacturing facility are not eligible.

It will be crucial to carve out QPP from ineligible parts of the facility.  A qualified cost segregation engineer familiar with manufacturing and construction must be consulted in order to maximize the benefit of QPP while avoiding errors that could invite IRS scrutiny. 

Timing is Everything:

To claim 100% bonus depreciation on QPP:

• Construction must commence (or acquisition must occur) between 1/20/2025 – 12/31/2028

• The property must be placed-in-service by 1/1/2031

• For acquisitions, the following must also be true:

• Property hasn’t been used in a “qualified production activity” by anyone between 1/1/2021-5/12/2025

• Property hasn’t ever been used by the taxpayer

• An election to treat assets as QPP must be made on a timely filed return

Unlike 100% bonus depreciation for personal property and land improvements, 100% bonus depreciation for QPP is temporary, so projects may need to accelerate timelines to take advantage of this tremendous benefit. 

The 179D Deduction: Still Going Strong for the Next Year

The popular §179D Energy-Efficient Commercial Buildings Deduction remains intact under the new law, but a sunset date of 6/30/2026 has been established. 

This deduction rewards energy-efficient design in:

• New construction and renovation projects

• Commercial buildings or residential rental buildings 4 or more stories above ground

• Government, nonprofit, or tax-exempt projects (designers may claim via allocation)

What’s Available?

Benefit is determined by building size, the extent to which energy consumption was reduced, and the satisfaction of Prevailing Wage and Apprenticeship Requirements (PWA). 

• If PWA Requirements aren’t met, the maximum benefit is $1.00/SF (adjusted for inflation.)

• If PWA Requirements are satisfied, the maximum benefit is multiplied five-fold to $5.00/SF.

Sunset Provision:

To claim the 179D Deduction under the OBBBA, construction must begin before 6/30/2026.

There is still ample time to claim the incentive for projects:

• Currently under construction

• Already in service

• In the pipeline – as long as they break ground by 6/30/2026.

This is a sizable opportunity — especially when paired with cost segregation — but timelines need to be considered.

A hopeful note – for most of its existence, 179D has phased in and out, being renewed piecemeal a few years at a time.  This sunset is nothing new, and may be modified by future legislation.

Accessing Opportunity

There’s no question that OBBBA is reshaping the incentive landscape.

To make the most of the new tax bill, Boyer & Ritter professionals work hand-in-hand with real estate owners to help:

• Identify eligible properties

• Optimize timing and strategy

• Capture every available incentive

Reach out to your Boyer & Ritter advisor today.