Navigating the OBBBA: Key Real Estate, Investor Changes

The One Big Beautiful Bill Act was signed into law on July 4, 2025, and it fundamentally reshapes tax policy for real estate, community development, and capital investment.

The act permanently expands affordable housing credits, restores 100% bonus depreciation, introduces a new industrial incentive, and accelerates the phase-out of several energy credits.

Below is a summary of the key changes you need to know.

Boosts for Housing, Investment

Low-Income Housing Tax Credit: The OBBBA permanently increases the state 9% LIHTC allocation by 12% starting in 2026 and lowers the 4% “bond test” to 25%.

These changes could help finance approximately 1.22 million new affordable homes nationwide over the next decade.

New Markets Tax Credit: The NMTC program is now permanent starting in 2026, ending years of temporary extensions and providing developers with more certainty for community revitalization projects.

Opportunity Zones and Rural Expansion: There are a second round of opportunity zones that will begin Jan. 1, 2027, and go through Dec. 31, 2033. They include updated reporting requirements and stricter compliance penalties.

In addition, the OBBBA creates Qualified Rural Opportunity Funds, which offer an enhanced 30% basis step-up (compared to 10% for standard OZs for investments held for five years.

This incentive aims to direct long-term capital into rural communities.

Cost Recovery, Capital Spending

100% Bonus Depreciation Restored: For qualified properties acquired after Jan. 19, 2025, the OBBBA permanently restores 100% bonus depreciation.

This benefit applies to both new and used assets, including qualified improvement property, such as interior improvements to nonresidential buildings.

Section 179 Expensing Expanded: The maximum deduction under Section 179 has doubled to $2.5 million, with a phase-out threshold of $4 million starting in 2025.

Qualifying property still includes roofs, HVAC systems, fire protection, and security systems, making it particularly relevant for repositioning commercial properties.

New Qualified Production Property Deduction: A temporary 100% deduction applies to the production or manufacturing portion of nonresidential real property where construction begins between Jan. 19, 2025, and Jan. 1, 2029, and is placed in service by 2031.

This serves as a powerful incentive for industrial and manufacturing developments.

Miscellaneous Changes

Limitation on Excess Business Losses of Noncorporate Taxpayers: The disallowance of “excess business losses” applies when aggregate business deductions exceed business income plus $250,000 for single filers (doubled for married couples filing jointly).

This limitation was originally set to expire in 2029; however, it has now been made permanent and indexed for inflation.

Any loss in excess of $250,000 above business income is treated as a net operating loss carryover.

Business Interest Expense Limitation: The calculation of adjusted taxable income is now based on earnings before interest, taxes, depreciation, and amortization.

This is less restrictive than the previous EBIT standard and is especially beneficial for depreciation-heavy industries like real estate.

Faster Sunset for Green Incentives

The OBBBA accelerates the phase-out of several federal energy–related credits. If these apply to your projects, timing is critical as follows:

• Clean vehicle credits (§30D new, §25E used): Expire Sept. 30, 2025
• Residential energy credits (25C/25D): Expire Dec. 31, 2025
• Alternative fuel refueling property (§30C): Expire June 30, 2026
• Commercial building efficiency (§179D): Expire June 30, 2026
• New energy-efficient home credit (§45L): Expires June 30, 2026

If you are relying on §179D or §45L incentives, your project needs to start construction before June 30, 2026.

Likewise, clean vehicle purchases must be finalized before Sept. 30, 2025.

Quick Action Checklist (2025–2026)

• Compare bonus depreciation with Section 179 expense for renovations and equipment. Make sure to keep in mind what state your property is in and if they follow the federal rules for accelerated depreciation.
• Consider QPP elections for industrial or manufacturing projects starting before 2029.
• Collaborate with LIHTC allocating agencies early to secure expanded credits starting in 2026.
• Explore QROFs for rural investments and the enhanced 30% basis step-up.
• Accelerate green projects now to take advantage of available credits before their expiration in 2025–2026.

The OBBBA creates both opportunities and deadlines. Your timing will be crucial in determining whether your projects can capture significant tax benefits or risk missing out.

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About the author: Melissa Braun is a partner in Whittlesey’s Hartford office with over 10 years of experience in public accounting.