Article
Opportunities and changes in new tax law for real estate and fixed asset owners
July 14, 2025 · Authored by Kyle Sund
The sweeping tax and spending legislation enacted on July 4, 2025, commonly referred to as the One Big Beautiful Bill Act (OBBBA), includes several provisions related to real estate and fixed assets, such as bonus depreciation, clean energy deductions and credits, among others, that introduce significant changes impacting taxpayers that own real estate and other fixed assets.
Key changes are as follows.
Bonus depreciation
Prior to the OBBBA, the first-year bonus depreciation allowance under Section 168(k) was scheduled to phase down to 40% in 2025, 20% in 2026, and sunset entirely to 0% in 2027.
The OBBBA increases the first-year bonus depreciation allowance under Section 168(k) to 100% for property acquired after Jan. 19, 2025, and makes the allowance permanent. This allows taxpayers to frontload depreciation deductions for qualifying property in the first year of ownership, lowering initial tax liability.
Qualified production property
The OBBBA introduces qualified production property as a new class of property under new subsection of Section 168. This class of property includes nonresidential real property used in qualified production activities and is eligible for a 100% special depreciation deduction in the year placed in service.
Qualified production property is generally the portion of any nonresidential real property that meets the following requirements:
- Must be used by the taxpayer — not by a lessee — as an integral part of a qualified production activity
- Must be placed in service in the U.S. or a U.S. territory
- Original use must commence with the taxpayer, with some exceptions for certain property not previously used in qualified production activities
- Construction must begin after Jan. 19, 2025, and before Jan. 1, 2029
- Must be placed into service after July 4, 2025, but before Jan. 1, 2031
- Taxpayer must elect to claim an immediate deduction with respect to the qualified property
Key definitions and items to note:
- A qualified production activity is generally the manufacturing, production, or refining of a qualified product.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.