The tax landscape for real estate investors is undergoing its most significant transformation in years. With the passage of the One Big Beautiful Bill Act in July 2025, property owners and investors face a mix of unprecedented opportunities and critical deadlines that will shape investment strategies well into the next decade.

At CSSI, we’re committed to helping you navigate these changes strategically. Here’s what every real estate investor needs to understand about the tax legislation changes heading into 2026.

The Looming Section 179D Deadline: Act Before June 30, 2026

For nearly two decades, Section 179D has been a cornerstone incentive for energy-efficient commercial building improvements. The deduction has allowed commercial building owners, architects, engineers, and contractors to claim substantial tax benefit, up to $5.81 per square foot for projects meeting prevailing wage requirements in 2025, for energy-efficient upgrades to HVAC systems, lighting, and building envelopes.

The One Big Beautiful Bill permanently repeals this deduction for projects that begin construction after June 30, 2026. This creates an extremely compressed window for capturing what could amount to hundreds of thousands of dollars in deductions for larger projects.

What You Need to Do Now

If you have any energy-efficient construction or renovation projects on your radar, the time to act is now. Here’s what qualifies:

• New construction projects incorporating high-efficiency HVAC, lighting, and building envelope systems
• Major renovations or retrofits to existing commercial buildings that improve energy performance
• Government and nonprofit building projects where design professionals can claim the deduction

The key requirement is simple but firm: your project must begin construction by June 30, 2026. The property can be placed in service after that date and still qualify, but ground must be broken before the deadline.

Don’t overlook the potential to claim Section 179D deductions on prior-year projects through amended returns. Properties completed in recent years may still qualify if you haven’t yet claimed the benefit. With the sunset approaching, conducting a review of your portfolio for eligible past projects becomes even more valuable.

The Return of 100% Bonus Depreciation: A Game-Changer for Real Estate

After years of uncertainty, bonus depreciation has returned to its full 100% allowance—and this time, it’s permanent. Under the Tax Cuts and Jobs Act of 2017, bonus depreciation was scheduled to phase out by 20% annually, dropping to 40% in 2025 and disappearing entirely by 2027. The One Big Beautiful Bill reversed this trajectory completely.

For property acquired after January 19, 2025, you can now immediately deduct 100% of the cost of qualifying assets in the year they’re placed in service. This applies to:

• Tangible personal property with a recovery period of 20 years or less
• Land improvements such as parking lots, sidewalks, and landscaping
• Qualified Improvement Property (QIP), including interior improvements to commercial buildings like flooring, lighting systems, interior doors, and HVAC components

Major Opportunity

100% bonus depreciation has been permanently reinstated for qualifying property acquired and placed in service after January 19, 2025. This is one of the most significant tax benefits available to real estate investors today.

Understanding the Timeline

The effective date of January 19, 2025, creates two distinct periods within the 2025 tax year:

• Property placed in service on or before January 19, 2025: Subject to the previous phase-out schedule (40% bonus depreciation)
• Property placed in service after January 19, 2025: Eligible for full 100% bonus depreciation

There is also a transitional election allowing certain taxpayers to apply a 40% or 60% rate for property placed in service shortly after January 19, 2025, depending on specific circumstances. Your tax advisor can help determine the most advantageous approach for your situation.

The Enhanced Business Interest Deduction

The One Big Beautiful Bill also reinstated the EBITDA-based limitation for the business interest expense deduction under Section 163(j). This reverses the less favorable EBIT-based limitation that has been in effect since 2022.

What this means in practice: when calculating the 30% cap on deductible business interest expenses, you can now add back depreciation, amortization, and depletion to your adjusted taxable income. For leveraged real estate investors with significant non-cash expenses, this change allows for greater interest expense deductions—a meaningful benefit given today’s interest rate environment.

The combination of enhanced business interest deductibility and reinstated bonus depreciation creates particularly powerful synergies when paired with cost segregation studies.

Federal R&D Tax Credit Changes: New Opportunities for Real Estate Developers

While traditionally associated with technology and manufacturing companies, the federal R&D tax credit has applications in real estate that many investors overlook. The One Big Beautiful Bill made significant improvements to this credit that warrant attention from developers undertaking innovative projects.

Section 174 Relief: Immediate Expensing Returns

Beginning in 2022, the Tax Cuts and Jobs Act required businesses to capitalize and amortize research and development expenses over five years for domestic R&D (fifteen years for foreign R&D). This created significant cash flow challenges for R&D-intensive businesses.

The One Big Beautiful Bill reverses this requirement for domestic R&D expenses. Through the creation of new Section 174A, taxpayers can once again immediately deduct domestic research and experimental expenditures for tax years beginning after December 31, 2024. Alternatively, taxpayers can elect to capitalize and amortize these costs over at least 60 months if that approach better suits their tax planning strategy.

Retroactive Relief and Catch-Up Provisions

The legislation includes two important transition rules:

For All Taxpayers: Any remaining unamortized domestic R&D expenses from 2022-2024 can be elected to be fully deducted in 2025, or spread ratably over 2025 and 2026. This catch-up provision can provide significant refund opportunities.

For Qualified Small Businesses: Companies with average annual gross receipts of $31 million or less for the three tax years preceding 2025 can elect to apply the new immediate expensing rules retroactively to tax years beginning after December 31, 2021. This allows them to amend returns for 2022 through 2024 to claim immediate deductions rather than amortization. The deadline to make this election is July 4, 2026.

Real Estate Applications

While software development and traditional R&D are the most common applications, real estate developers engaged in innovative construction methods, sustainable building techniques, or developing new building systems may qualify for R&D credits. The improved treatment of R&D expenses makes it worthwhile to evaluate whether your development activities include qualifying research expenditures.

Strategic Planning Considerations for 2026

As we move into 2026, real estate investors should be thinking strategically about how these tax changes intersect with their investment plans:

Timing of Acquisitions and Improvements

With permanent 100% bonus depreciation for property acquired after January 19, 2025, there’s no longer a rush to accelerate purchases before an impending phase-out. However, there is still value in strategic timing relative to your income, passive loss limitations, and overall tax situation.

Cost Segregation Studies

If you haven’t had cost segregation studies performed on properties acquired after January 19, 2025, you’re likely leaving significant tax benefits on the table. Even properties acquired in prior years may benefit from “look-back” studies using Form 3115 to claim missed depreciation without amending returns.

Section 179D Projects

With only months remaining until the June 30, 2026 deadline, any energy-efficient construction or renovation projects should be evaluated immediately. For projects in the planning stages, accelerating the construction start date could preserve access to substantial deductions.

R&D Expense Review

If you’re a developer or engaged in innovative real estate activities, review your activities with a qualified R&D tax credit specialist to determine if you have qualifying research expenses. The window to claim retroactive benefits for 2022-2024 closes July 4, 2026 for qualified small businesses.

State Tax Considerations

Remember that not all states conform to federal bonus depreciation rules or other provisions discussed here. It’s critical to work with tax advisors who understand both federal and state tax implications of these strategies, particularly if you own property in multiple states.

How CSSI Can Help

The tax changes introduced by the One Big Beautiful Bill create both tremendous opportunities and critical deadlines for real estate investors. At CSSI, we specialize in helping property owners and investors navigate complex tax legislation to maximize benefits while ensuring full compliance.

Our services include comprehensive cost segregation studies, Section 179D analysis, R&D tax credit consultation, and strategic tax planning tailored to real estate investors. Don’t leave money on the table or miss critical deadlines.

Contact CSSI today to discuss how these tax changes affect your portfolio and to develop a strategy that maximizes your tax benefits in 2026 and beyond.