On a warm and fair July 4, President Donald Trump signed into law a sprawling bill that stitched together nearly every item on his legislative wish list, capping a dramatic journey through Congress that saw the measure transformed in the Senate before the House, seeking speed, adopted the revised version. The final legislation, nearly a thousand pages long, not only reshapes the tax landscape but also delivers sweeping changes with far-reaching implications for commercial real estate, social programs, and the broader economy.
While the law brings much-needed certainty to some corners of CRE, reactions are mixed. Some industry insiders hail the legislation as a boon, while others dismiss it as inconsequential. The bill’s impact is complex and, given its sheer size, not easily summarized.
Among its most significant provisions is the permanent establishment of Opportunity Zones, now set to operate in 10-year cycles with stricter eligibility requirements than those defined in the 2017 Tax Cuts and Jobs Act. The new law includes a “guardrail” to ensure that low-income communities cannot encompass census tracts with overly high median family incomes. Rick Porras, chief financial officer at Neology Group, explained to GlobeSt.com that investors will benefit from a single 10% step-up in basis if an investment is held for at least five years, with the potential for a 30% step-up for qualifying rural Opportunity Zone properties. This structure both defers capital gains and increases the investment's basis, effectively reducing the taxable gain.
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For many in the real estate sector, the restoration of 100% bonus depreciation stands out as a major victory. Matthew Rossman, director of marketing at Bryan Industrial Properties, told GlobeSt.com that this provision is driving significant tax savings for his clients, enabling them to offset large windfalls by combining property purchases, cost segregation and bonus depreciation. Marcel Arsenault, founder and CEO of Real Capital Solutions, emphasized that the real value of bonus depreciation lies in its strategic application, particularly for tenant improvements and portions of building purchases. “This additional expense will reduce investors’ overall tax bill and could be used to offset other income,” Arsenault noted.
The law also revises the calculation of Adjusted Taxable Income, allowing for the add-back of depreciation, amortization and depletion. This change, Arsenault explained, bolsters the basis for deducting interest expenses, which are capped at 30% of ATI. “This change makes it easier to fully deduct interest expense or at least allows for full deduction of interest expense and depreciation/amortization expense—a taxpayer sometimes had to choose which to maximize,” he added.
Carey Heyman, managing principal of industry and real estate at CliftonLarsonAllen, pointed to the expanded Section 179 expensing, which allows businesses to fully deduct qualifying improvement and equipment costs upfront. On the state and local tax front, Heyman noted that the SALT cap will temporarily increase for taxpayers earning less than $500,000, before reverting to the $10,000 limit in 2030. The final Senate package also preserves the pass-through entity tax (PTET) workaround, a win for taxpayers in high-tax states, and raises the estate and gift tax exemption to $15 million, offering new opportunities for real estate families to consider succession and wealth transfer strategies.
Yet, not everyone in CRE believes the law will have a transformative effect. “It really does nothing for or against commercial real estate,” Greg Kraut, co-founder and CEO of KPG Funds, told GlobeSt.com. He acknowledged that the increase in SALT deduction limits could help residential real estate values but added, “nobody I know is talking about this at all.”
The legislation’s reach extends beyond CRE, with some provisions likely to have negative consequences. George Carrillo, CEO of the Hispanic Construction Council, observed that while the higher SALT cap and larger 23% Qualified Business Income deduction offer “immediate relief for high-income earners and pass-through entities operating in high-tax states,” the bill’s deep spending cuts will hit low-income communities and, by extension, CRE.
For example, KFF estimates that the law will reduce federal Medicaid spending by more than $700 billion over ten years, a move that could accelerate rural hospital closures and affect senior housing, given that health coverage has been the primary payer for 63% of nursing facility residents through July 2024. Cuts to SNAP and Affordable Care Act funding are also expected to place additional financial pressure on low-income communities, impacting how multifamily housing, mixed-use developments, and neighborhood retail projects are planned and financed, Carrillo told GlobeSt.com.
Finally, with the bill’s vast scope and the limited time lawmakers had to review its provisions, observers caution that further consequences—both intended and unintended—may yet emerge as the law takes effect.
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