One Big Beautiful Bill Act Impact to the Real Estate and Construction Industries

On July 4th, President Trump signed The One Big Beautiful Bill Act (OBBBA) into law. While the OBBBA has introduced numerous changes affecting all industries, the real estate and construction industries are now faced with distinct planning opportunities.

Each of the provisions below have different thresholds, limitations, and planning opportunities, so please reach out if you have any questions on how any of the changes below will affect you.

• Qualified Business Income Deduction (Section 199A): The QBI deduction, which allows eligible pass-through business owners to deduct up to 20% of their qualified business income, remains at 20%, but OBBBA has made this a permanent change. This change enables long-term planning for many real estate and construction companies.
• 100% Bonus Depreciation and Section 179 Expensing: A new provision makes 100% bonus depreciation a permanent change for qualified property placed in service after January 19, 2025. In addition, the amounts and thresholds for Section 179 expensing are increased as of January 1, 2025. These provisions allow for accelerated deductions on qualified property and equipment, helping to encourage capital investment by lowering the after-tax cost.
• Qualified Production Property: A temporary provision will allow full expensing for certain building property typically depreciated over 39 years and previously excluded from bonus depreciation.  To qualify, the property must be an integral part of a qualified production activity, placed in service in the U.S. or its possessions, and its construction must begin after January 19, 2025, and be placed in service before January 1, 2031. It’s important to note that leased property and portions of buildings used for non-production purposes (like offices) do not qualify. There’s also a special provision for some used property if it hasn’t been in production use since January 1, 2021.
• Section 163(j) Business Interest Deduction Relief: The business interest deduction is being restored for large companies. Once again, depreciation and amortization will be eligible to be added back when calculating the limitation. This change is especially beneficial to businesses with significant capital investments as it generally allows for more interest to be deducted.
• State and Local Tax (SALT) Deduction: For those who itemize deductions, the SALT cap has been increased from $10,000 to $40,000. Be careful though as there is a quick phase-down of this deduction back to $10,000 once adjusted gross income (AGI) hits $500,000. The Pass-Through Entity  (PTE) election, available in many states, allows certain businesses-such as S corporations, partnerships, and LLCs, to pay state tax at the entity level and bypass the federal SALT deduction cap. Even with the higher SALT cap, the PTE election will remain a valuable tool for many businesses and their owners.
• Qualified Opportunity Zone (QOZ) Program: The qualified opportunity zone program has been made permanent and has expanded with new rural opportunity zones. There are also increased tax incentives to invest in rural areas. There will be expanded reporting requirements for those investing in QOZs.  The current QOZs expire on December 31, 2026, and the new zones will become effective on January 1, 2027.
• Completed Contract Method of Accounting: Contracts eligible for exemption from the percentage of completion accounting method have been expanded. Previously, only “home construction contracts” qualified, but now the exemption is expanded to include “residential construction contracts.” This change means that multi-family buildings and condominium developments can now use alternative accounting methods like the completed contract method and more closely match tax liability with actual receipts.
• Low-Income Housing Tax Credit (LIHTC): State credit allocations were permanently increased by 12%, and the private activity bond threshold was lowered for some projects from 50% to 25%. These changes are expected to stimulate the development and rehabilitation of affordable rental housing.
• Energy Tax Credits Phaseout Accelerated: Many energy incentives, including Section 179D deduction and Section 45L credits, will no longer be available within the next year. If you are considering anything related to energy-efficient property, now is the time to review if it would make sense for your business.
• Form1099 Information Reporting: The bill increases the information reporting threshold for certain payments to persons engaged in a trade or business. Beginning in 2026, the threshold has increased from $600 to $2,000 and will be indexed annually for inflation.

Our full overview of the OBBBA including individual provisions can be found here – The One Big Beautiful Bill Recap . If you have any questions or thoughts, please do not hesitate to reach out to your Wilkins Miller advisor, and we can discuss how these changes may impact you and your specific situation.