2025 OBBBA Tax Law Brings Major Real Estate Incentives to Property Owners

The following article is based on insights shared by Greenberg Glusker partners Schuyler “Sky” Moore and Michael Wiener during their recent webinar on the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.

The OBBBA introduces significant, long-term tax benefits for real estate investors, developers, and owners. Several provisions are expected to create new planning opportunities—particularly for those involved in commercial property transactions, redevelopment, and strategic acquisitions. Below are key takeaways most relevant to GMP’s clients.

Qualified Opportunity Zones Made Permanent

• Ongoing Designations: Starting July 1, 2026, governors will designate new Opportunity Zones every 10 years, with each designation effective for a decade.
• Stricter Eligibility: The law narrows the definition of “low-income community,” eliminating contiguous tract designations and special treatment for Puerto Rico. This will likely reduce the number of eligible zones by 20–25%.
• Permanent Structure: Investors can defer taxable gains for five years from the date of investment in a Qualified Opportunity Fund (QOF), with a 10% basis step-up at the end of that period.
• Rural Incentives: A Qualified Rural Opportunity Fund (90% of assets in rural zones) offers a 30% reduction in deferred gain and relaxed “substantial improvement” requirements (50% of adjusted basis instead of 100%).
• 10-Year Hold Advantage: Gains from QOF investments held at least 10 years are fully excluded from federal tax if sold within 30 years of investment.
• New Reporting Requirements: Starting with 2026 tax returns, QOFs and Opportunity Zone businesses must report:
  • Their NAICS code (North American Industry Classification System), which identifies the primary type of business activity—such as commercial property leasing, construction, or property management.
  • The number of residential units owned (if applicable).
  • The number of full-time equivalent employees or similar job impact metrics.
  • Penalties for noncompliance are significant, with fines of up to $250,000 for large funds.

Bonus Depreciation and Section 179 Expensing Expanded

• Bonus Depreciation: Permanent 100% first-year deduction for most tangible personal property with a depreciable life of 20 years or less. Cost segregation studies will be key to identifying eligible property components.
• Section 179 Expensing: Deduction limit increased to $2.5M (up from $1M), with the phase-out threshold raised to $4M. Applies to qualified improvement property and specific building systems such as roofs, HVAC, fire protection, and security systems.
• Planning Note: Both provisions create “Section 1245 property,” which can trigger depreciation recapture as ordinary income upon sale and may affect 1031 exchange strategies.

100% Deduction for Qualified Production Property

A new incentive allows a full deduction for the cost of purchasing or constructing buildings in the U.S., if:

• The property is used for manufacturing, production, or refining tangible personal property.
• Purchase or construction occurs after Jan. 19, 2025, and before 2029.
• Placed in service after July 4, 2025, and before 2031.
• Either the original use begins with the taxpayer or the building has not been used for a qualified purpose since Jan. 1, 2021.
• This property is also treated as Section 1245 property, subject to recapture rules if sold or if use changes within 10 years.

Farmland Sale Tax Deferral

Gain from selling qualified farmland to a qualified farmer can be paid in four equal annual installments. The land must have been farmed or leased for farming for most of the past 10 years and remain restricted to agricultural use for the following 10 years.

Bottom Line for Owners

The 2025 OBBBA creates long-term opportunities to reduce taxable gains, accelerate deductions, and plan transactions around new incentives—especially for properties in designated Opportunity Zones or qualifying for accelerated depreciation. Owners should evaluate portfolios now to identify where these benefits may apply and adjust investment strategies before key effective dates in 2026 and beyond.

GMP is committed to keeping commercial property owners informed about legislative and regulatory changes that may affect their investments. For guidance on how proactive property and asset management can support your long-term investment goals, contact GMP today.