The Commercial Real Estate Alpha Site

One of my colleagues and friends (Susan Goldstein) put together a clean and comprehensive synopsis of the big beautiful bill with focus on the Commercial Real Estate industry.

Below find a summary of Susan’s post. The full post can be found here —->SRQ Gold

The “One Big Beautiful Bill Act,” enacted on July 4, 2025, introduces a set of federal tax provisions that will materially affect commercial real estate (CRE) owners in Florida. Many of these provisions are retroactive to January 19, 2025, while others begin in the 2026 tax year.

The bill reinstates 100% bonus depreciation and increases Section 179 expensing limits, both of which affect how quickly commercial property owners can deduct capital expenditures. It also makes permanent the Qualified Business Income (QBI) deduction and Opportunity Zone incentives and preserves like-kind (1031) exchanges and carried interest tax treatment.

While these changes are expected to improve near-term tax outcomes for many Florida CRE stakeholders, the legislation also introduces some limitations and areas of uncertainty. A foreign investor withholding tax (Section 899) could discourage inbound capital from key markets, and the sunset of clean-energy tax credits after 2025 may limit incentives for green building retrofits. Additionally, future technical corrections or amendments could revise or scale back some benefits.

Overall, the Act presents a mixed set of opportunities and risks, and commercial real estate participants should conduct individualized tax and investment analysis to assess the bill’s real-world effects on their portfolios.

1. Enhanced Tax Incentives and Depreciation Benefits

 100% Bonus Depreciation (Restored and Permanent)

• Key Benefit: Allows full expensing of qualifying assets in the year placed in service (from Jan 19, 2025, through 2029).
• Impact:
• Immediate ROI improvements for capital-intensive rehabs and acquisitions.
• Incentivizes hotel rebrands, tenant improvements, and Class-B office retrofits.
• Encourages rapid deployment of capital into underutilized assets.

 Section 179 Deduction Expanded

• New Cap: Raised to $2.5 million, with phase-out starting at $4 million.
• Impact:
• Supports small landlords and investors in expensing tenant improvements and upgrades for strip malls and flex-industrial properties.

Section 179 Deduction Expanded

What is Section 179?

Section 179 of the Internal Revenue Code allows businesses to deduct the full cost of qualifying assets in the year they are placed into service, rather than spreading the deduction over multiple years through standard depreciation.

Qualifying assets include:

• Tangible personal property used in business (e.g., equipment, fixtures).
• Certain building improvements, including HVAC systems, fire protection, alarm and security systems, and interior improvements (collectively called Qualified Improvement Property, or QIP).

Prior Cap (Pre-Bill Levels)

As of 2024, the maximum Section 179 deduction was:

• $1.16 million in eligible purchases.
• With a phase-out beginning at $2.89 million in total asset purchases.

These limits are inflation-adjusted annually.

New Cap Under the Bill

The Act increases the Section 179 limits of both the deduction cap and the phase out threshold:

• Deduction cap: $2.5 million.
• Phase-out threshold: $4 million.
• Effective for assets placed in service after December 31, 2024.

Implications for CRE Owners in Florida

• Owners of retail centers, industrial condos, and small-to-mid-size office properties for example  can expense a broader range of interior renovations and systems upgrades.
• The larger deduction cap benefits smaller landlords and businesses that previously couldn’t fully deduct improvements due to phase-outs.
• Section 179 remains limited to taxable income, meaning deductions cannot exceed a taxpayer’s net business income for the year. However, it still provides substantial flexibility for budgeting and capital planning.

 Cost Segregation Gains

• Effect: Significantly boosts first-year tax savings by identifying shorter-lived property components.
• Application: Particularly valuable for ground-up developments and major renovation projects.

2. Preserved & Strengthened Real Estate Provisions

 Permanent Qualified Business Income (QBI) Deduction

• Boosted to 23% for CRE pass-throughs (LLCs, partnerships).
• Florida Advantage: State-level tax-exempt environment amplifies federal benefits.

 Section 1031 Exchanges & Carried Interest Treatment Preserved

• Continued Tax Deferral: Owners can still defer gains when rolling equity into new deals.
• Result: Maintains liquidity and momentum in transactional markets.

 Interest Deduction Relief (Sec. 163(j))

• Adjustment: Depreciation now added back to adjusted taxable income.
• Result: Higher deductibility threshold reduces financing friction on leveraged projects like office-to-lab conversions.

3. Investment Catalysts: Opportunity Zones and LIHTC

 Opportunity Zones (OZ) 2.0 – Permanent and Enhanced

• Key Features:
• Program made permanent.
• New 10-year designation cycles.
• 10%–30% basis step-ups for longer-term holds.
• Florida Opportunity:
• Over 400 existing OZ tracts in Sarasota, Fort Myers, and the Panhandle.
• Renewed energy for workforce and mixed-use development.

 Low-Income Housing Tax Credit (LIHTC) Expanded

• Provisions:
• 12.5% allocation increase.
• 30% basis bump for rural/tribal areas.
• Local Impact:
• Makes affordable multifamily projects more financially viable in Florida’s interior counties and fast-growing suburbs.

…

5. Risks and Limitations

 Section 899 Foreign Withholding Tax

• Impact: A 5–20% withholding on foreign investors from “unfriendly” tax jurisdictions.
• Florida Concern: Could chill Latin American and Canadian capital flows into Miami, Orlando, and Sarasota markets.

 Clean-Energy Tax Credit Expiry

• Change: Credits for solar, EV, and HVAC retrofits expire after 2025 unless projects are underway.
• Effect: Reduces incentives for green building upgrades, potentially increasing long-term operating costs.

 Pending Technical Corrections

• Uncertainty: Provisions like 1031 exchanges could face future tightening in Congressional “fix” bills.
• Recommendation: Monitor updates and coordinate with tax counsel proactively.

6. Strategic Action Plan for Florida Property Owners

Task

Description

 Run Cost Segregation Studies

For assets acquired or improved after Jan 19, 2025.

 Reassess Ownership Entities

Evaluate REIT vs. LLC vs. C-Corp structures with new QBI and TRS rules.

 Re-underwrite OZ & LIHTC Deals

Incorporate new timelines and incentives.

 Model Capital Stacks

Include foreign capital risk exposure under Sec. 899.

 Act on Energy Projects

Begin solar or HVAC retrofits before 2026 sunset.

 Engage Local Tax Appraisers

Ensure accelerated depreciation doesn’t inflate assessed values.

Conclusion

The “One Big Beautiful Bill Act” introduces a series of permanent and temporary changes to the federal tax code that will shape real estate ownership and investment strategies in Florida.

On the positive side, the legislation strengthens some of the most commonly used tax tools in the commercial real estate sector, including bonus depreciation, Section 179 expensing, QBI deductions, and Opportunity Zone incentives. These changes are likely to improve the after-tax returns for many property owners, especially those with value-add, development, or improvement-based business models.

However, the bill also presents potential downsides and complications. The elimination of Section 179D energy efficiency deductions after mid-2026 may reduce the financial case for sustainability upgrades. The new withholding tax on certain foreign investors may reduce cross-border investment in Florida’s gateway markets. Additionally, as with all reconciliation legislation, the risk of future technical corrections—such as limits on 1031 exchanges or passive loss rules—remains a concern.

Commercial property stakeholders in Florida should review their asset strategies, tax entity structures, and project timelines in light of the new provisions, and consult with tax advisors to ensure compliance and optimization.