The One Big Beautiful Bill Act (OBBBA) extends and enhances pro-real estate tax incentives, including 1031 exchanges, favorable capital gains rates, and an increased QBI deduction for pass-through entities.
The bill restores 100% bonus depreciation and expands affordable housing incentives — notably through LIHTC enhancements and Opportunity Zone revisions.
Overall, OBBBA positions the multifamily sector to remain an attractive investment asset class by improving after-tax returns, reducing financing barriers, and supporting long-term housing production.
The One Big Beautiful Bill Act (OBBBA) extends and enhances pro-real estate tax incentives, including 1031 exchanges, favorable capital gains rates, and an increased QBI deduction for pass-through entities.
The bill restores 100% bonus depreciation and expands affordable housing incentives — notably through LIHTC enhancements and Opportunity Zone revisions.
Overall, OBBBA positions the multifamily sector to remain an attractive investment asset class by improving after-tax returns, reducing financing barriers, and supporting long-term housing production.
In May 2025, House Republicans narrowly passed a sweeping tax and spending bill aimed at extending and expanding key provisions of the 2017 Tax Cuts and Jobs Act (TCJA), while introducing several new measures. The legislation—the “One Big Beautiful Bill Act” (OBBBA)—features extended tax cuts, new federal benefits eligibility requirements, and an increase to the national debt ceiling. The bill has major implications for the commercial real estate market, especially the multifamily rental sector, by reshaping investor incentives, developer financing, and potentially renter affordability.
Permanent Extension of 2017 Tax Cuts: The bill makes permanent the lower individual income tax rates and increased standard deductions established by the 2017 Tax Cuts and Jobs Act (TCJA).
State and Local Tax (SALT) Deduction Cap Raised: The SALT deduction cap is increased from $10,000 to $40,000 for taxpayers earning under $500,000.
The tax bill includes a suite of incentives that directly benefit real estate investors, making multifamily assets more attractive from a tax perspective. Key investor-focused provisions include:
1031 Like-Kind Exchanges: The long-standing 1031 exchange, which allows investors to defer capital gains taxes by reinvesting proceeds into other real estate, remains fully intact. No new limits were imposed in 2025, despite earlier discussions of capping deferrals above $500,000. By preserving 1031 exchanges, the new law continues to encourage property sales and acquisitions in the multifamily sector, enabling investors to trade into larger or more efficient assets without immediate tax consequences. This flexibility supports transaction volume and property value growth.
Depreciation & 100% Expensing: A key benefit of the 2025 tax bill is the restoration of 100% bonus depreciation for real estate investments. Previously planned to be phased out, this provision again allows full first-year expensing of qualifying improvements and personal property, accelerating write-offs for apartment renovations, fixtures, and equipment. For multifamily investors, it enables immediate deductions on items like appliances, HVAC systems, and flooring, enhancing early cash flow and returns. By lowering the user cost of capital, this change is expected to drive private investment.
Pass-Through Deduction (QBI/Section 199A): Multifamily owners often operate through pass-through entities. The TCJA’s 20% Qualified Business Income (QBI) deduction—previously set to expire after 2025—is not only extended but increased to 23% under the new law. This larger deduction further lowers effective tax rates for private landlords and real estate funds. Additionally, small developers benefit from the bill’s higher Section 179 limit ($2.5 million), enabling immediate expensing of project costs and equipment.
Capital Gains Tax Treatment: Preferential tax treatment for long-term capital gains remains unchanged under the new law. The maximum federal capital gains rate stays around 20%, compared to up to 37% for ordinary income. This favorable differential continues to incentivize investors to realize gains on appreciated multifamily properties or reinvest using 1031 exchanges. By not raising capital gains taxes, the law helps maintain strong investor appetite for apartment transactions.
Opportunity Zones & Other Incentives: The 2025 tax bill extends and revises the Opportunity Zone (OZ) program, moving beyond its original 2026 sunset. The current OZs will phase out, with a new 2027–2033 round launching under updated rules. States will be able to designate new zones, with an emphasis on high-poverty and rural areas; qualifying rural OZ projects will also benefit from a 30% bonus basis boost. Additionally, the OBBA introduces a streamlined basis step-up structure and rural investment super incentive: investors will now receive a flat 10% basis step-up after a five-year holding period, replacing the previous two-tier (5%/10%) system. Separately, the bill raises the estate tax exemption to $15 million per individual (up from approximately $12 million), which is expected to encourage longer-term investment in assets such as multifamily properties.
Cheaper After-Tax Financing (Interest Deductibility): Under the TCJA, interest was deductible up to 30% of EBITDA through 2021, but starting in 2022, a stricter 30% of EBIT limit applied. The 2025 tax bill reverses this, restoring the more favorable EBITDA-based limit from 2025 to 2029. This allows developers to deduct a larger portion of interest payments, reducing taxable income on leveraged projects.
Low-Income Housing Tax Credit (LIHTC) Expansion: A centerpiece of the 2025 tax package is the largest expansion of affordable housing tax credits in decades. Three significant LIHTC provisions were included, aiming to spur affordable multifamily construction:
> Reducing the Private Activity Bond “50% Test” to 25%: Developers seeking 4% LIHTCs now only need to finance 25% of project costs with bonds—down from 50%— allowing states to finance twice as many projects.
> Increasing the 9% Credit Allocation: The bill makes permanent a 12.5% increase in annual 9% LIHTC allocations, boosting tax credit availability.
> New Basis Boosts for Underserved Areas: Rural and Native American developments can now receive up to a 30% basis boost, improving project viability where costs or low rents previously limited feasibility.
Other Financing and Business Impacts: The 2025 bill includes several additional provisions favorable to real estate investors. Notably, it preserved the deduction for state and local property taxes at the business level — an important win for multifamily owners, especially in high-tax markets.
The Trump administration’s One Big Beautiful Bill marks a notable shift in U.S. tax policy with clear pro-real estate implications. It not only reinforces the investor-friendly framework of the 2017 TCJA but also introduces new housing incentives and eases constraints such as interest deductibility limits. The bill boosts investor returns and preserves key tools: 1031 exchanges, favorable capital gains rates, and expanded write-offs on rental income and property improvements. Collectively, these changes enhance real estate’s appeal as an investment asset class and are likely to sustain strong capital flows into multifamily. The bill ultimately signals a policy pivot toward stimulating housing investment to drive economic growth and meet housing demand.
