- The proposed bill would raise the Qualified Business Income (QBI) deduction from 20% to 30%.
- Opportunity zones would return for tax years 2027 to 2033, offering updated capital gains tax benefits.
- Bonus depreciation would be extended, allowing 100% first-year deductions on qualified property through 2029.
- The bill keeps 1031 exchanges and carried interest intact, avoiding changes often targeted in tax reforms.
What’s in the Bill?
According to GlobeSt, a new tax bill could offer major gains for commercial real estate (CRE) investors. John Chang of Marcus & Millichap highlighted the most relevant changes in a recent update.
The QBI deduction would increase from 20% to 30%, expanding tax incentives and boosting after-tax income for many real estate professionals. This change is especially helpful for pass-through entities.
Opportunity Zones Make a Comeback
The bill would reinstate opportunity zones from 2027 to 2033. These zones would provide deferred capital gains taxes and new exclusion benefits. The structure is similar to the 2017 version, but with a few adjustments.
100% Bonus Depreciation Returns
The proposal brings back 100% bonus depreciation for qualified property. It applies to assets placed in service between January 19, 2025, and January 1, 2030.
The Section 179 cap would rise to $2.5M, allowing full write-offs on equipment and software. These tax incentives make cost segregation studies more valuable. They also boost first-year returns on upgraded or newly acquired properties.
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No Changes to 1031 Exchanges or Carried Interest
The bill does not touch 1031 exchanges or carried interest. These elements are often targeted during tax reform talks. Their inclusion is seen as a major positive for syndicators, funds, and developers.
Watch the Deficit
While CRE investors may benefit, the bill could raise the federal deficit. That would likely require the Treasury to issue more bonds, pushing interest rates higher.
Some lawmakers, including Senator Ron Johnson, have raised concerns. The bill’s final language may still change during negotiations.
Why It Matters
These tax incentives could lift after-tax returns for many CRE investors. Value-add and development projects may see the biggest gains.
As Chang notes, “100% bonus depreciation could bolster first-year returns.” For now, all eyes are on Congress as the final bill takes shape.
