The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025¹, represents the most significant commercial real estate tax legislation since the Tax Cuts and Jobs Act of 2017. For small and medium-sized commercial real estate investors in Northern Virginia, this comprehensive tax reform creates unprecedented opportunities to maximize returns and accelerate wealth building.

What is the One Big Beautiful Bill?

The One Big Beautiful Bill Act is comprehensive federal tax legislation that extends numerous provisions from the 2017 Tax Cuts and Jobs Act while introducing new incentives specifically designed to boost commercial real estate investment and domestic manufacturing². The Tax Foundation estimates this legislation will reduce federal tax revenue by $5 trillion over the next decade while increasing long-run GDP by 1.2 percent³. The legislation’s core focus is permanent tax relief, making several previously temporary provisions permanent while introducing new accelerated depreciation benefits that dramatically change the commercial real estate investment landscape.

Revolutionary Impact on Small and Medium Commercial Real Estate Investors. The 100% Bonus Depreciation Game-Changer

The OBBBA’s most transformative provision for commercial real estate investors is the permanent restoration of 100% bonus depreciation. Here’s what this means in practical terms: What Changed: For “qualified property” acquired on or after January 20, 2025, the Bill permanently restores 100% bonus depreciation. Without the Bill, bonus depreciation rates would have been 40% in 2025, 20% in 2026, and 0% in 2027 and beyond⁴. The Historical Context: Commercial building components have traditionally been depreciated over 39 years using straight-line depreciation, requiring property owners to spread building costs over nearly four decades⁵. Under the Modified Accelerated Cost Recovery System (MACRS), nonresidential real property must be depreciated over 39 years using straight-line depreciation with a mid-month convention⁶. The Revolutionary Advantage: Instead of deducting building improvements over 39 years, qualifying property can now be fully expensed in year one. Real estate businesses may now fully expense eligible improvements in the year the property is placed in service, rather than depreciating those costs over multiple years, reducing taxable income in capital-intensive years⁷.

Expanded Section 179 Deductions

The OBBBA increases the Section 179 deduction cap from $1 million to $2.5 million, with phase-outs beginning at $4 million for property placed in service after December 31, 2024⁸. This allows small and medium investors to immediately expense qualifying equipment, HVAC systems, and certain property improvements that previously required multi-year depreciation schedules.

New Qualified Production Property (QPP) Benefits

The OBBBA adds a 100% depreciation allowance for qualified production property (QPP) placed in service through 2032, covering newly constructed nonresidential real estate used for manufacturing, production, or refining⁹. Although intended for manufacturing, this provision may allow developers constructing industrial buildings for qualifying use to deduct building costs in full¹⁰.

Who Benefits Most?

The OBBBA creates particularly strong advantages for:

1. Industrial Property Developers: Manufacturers can now immediately write off qualifying real estate investments, spurring industrial development¹¹
2. Property Renovators: Investors undertaking major renovations can expense qualifying improvements immediately
3. Equipment-Heavy Operations: Businesses with significant HVAC, security, or specialized equipment installations
4. Small-Medium Portfolios: Real estate businesses managing mid-sized portfolios should consider how to combine expanded Section 179 expensing with bonus depreciation to maximize project-level tax efficiency¹²

Historical Context: From Decades to Days

Understanding the magnitude of this change requires historical perspective: Pre-1981: Commercial real estate depreciation varied widely with flexible useful lives 1981-1986: The Accelerated Cost Recovery System (ACRS) standardized depreciation periods 1987-Present: MACRS established the current system requiring commercial buildings to be depreciated over 39 years straight-line 2017-2022: The Tax Cuts and Jobs Act introduced temporary 100% bonus depreciation 2023-2024: Bonus depreciation phased down (80% in 2023, 60% in 2024, 40% in 2025) 2025-Forward: The OBBBA permanently restores and expands 100% bonus depreciation This represents a shift from spreading costs over nearly four decades to potentially expensing them entirely in year one—a transformation that fundamentally changes commercial real estate investment mathematics.

Cost Segregation: Your Secret Weapon

Cost segregation studies identify building components that qualify for accelerated depreciation, separating assets that can be depreciated over 5, 7, 15, or 20 years rather than the standard 39-year building schedule. Under the OBBBA, cost segregation becomes even more powerful because:

• Qualified property generally includes MACRS property with a recovery period of 20 years or less and Qualified Improvement Property (QIP), defined as interior improvements made to non-residential real property after the building is first placed in service¹³
• Components like HVAC systems, electrical work, flooring, and interior walls may qualify for immediate 100% expensing¹⁴
• While buildings themselves don’t qualify for bonus depreciation, a cost segregation study can identify components that do, especially useful for commercial or investment property owners¹⁵

Practical Tips to Maximize These Changes

1. Timing is Everything: 100% bonus depreciation applies to qualified property acquired and placed in service after January 19, 2025¹⁶
2. Plan Major Renovations Strategically: Schedule substantial improvements after January 19, 2025, to capture full first-year expensing
3. Consider Cost Segregation Studies: Even for existing properties, identify components eligible for accelerated depreciation
4. Evaluate the Business Interest Deduction: The OBBBA reinstates the EBITDA-based limitation under IRC §163(j), allowing businesses to recapture depreciation, amortization, and depletion when calculating adjusted taxable income for the 30% cap on business interest deductions¹⁷
5. Review Entity Structure: The OBBBA makes the 199A (QBI) deduction provisions permanent and keeps the deduction rate at 20%, benefiting pass-through entities¹⁸

It’s Not Too Late: Existing Property Opportunities

If you’ve already purchased commercial property, significant opportunities remain: Retroactive Benefits: The IRS allows current building owners to claim depreciation dating back to 1986 that they should have been deducting, with all extra depreciation claimed in the year of the election without amending past tax returns¹⁹. Component Analysis: Conduct cost segregation studies on existing properties to identify previously missed accelerated depreciation opportunities Future Improvements: Plan renovations and improvements to take advantage of new 100% bonus depreciation rules Equipment Upgrades: Replace aging HVAC, security, or other systems to capture immediate expensing benefits

The Bottom Line

The One Big Beautiful Bill represents a generational shift in commercial real estate taxation. For Northern Virginia investors, this legislation transforms the fundamental economics of property investment by allowing immediate expensing of qualifying improvements rather than multi-decade depreciation schedules. The key to success lies in strategic timing, professional tax planning, and understanding which property components qualify for these enhanced benefits. Smart investors will work with qualified tax professionals and cost segregation specialists to maximize these unprecedented opportunities. Always consult with qualified tax professionals before making investment decisions. This article is for informational purposes only and should not be considered tax advice.

---

References

1. Urban Land Institute. “July Economist Snapshot: What Will the Big Beautiful Bill Mean for Commercial Real Estate and Housing?” Urban Land Magazine, July 2025.
2. Stinson LLP. “One Big Beautiful Bill Explained.” Legal Analysis, July 2025.
3. Tax Foundation. “One Big Beautiful Bill Act Tax Policies: Details and Analysis.” July 2025.
4. Stinson LLP. “One Big Beautiful Bill Explained: Tax Provisions Analysis.” July 2025.
5. McGuire Sponsel. “What is MACRS Depreciation?” Tax Advisory Services, 2025.
6. Wikipedia. “MACRS – Modified Accelerated Cost Recovery System.” Updated April 2025.
7. Grassi Advisors. “Tax Reform for Real Estate: What the One Big Beautiful Bill Means for Your Business.” July 2025.
8. Buchanan Ingersoll & Rooney PC. “One Big, Beautiful Bill . . . Simplified.” Legal Analysis, 2025.
9. CLA Connect. “Provisions in One Big Beautiful Bill May Impact Real Estate.” Real Estate Tax Blog, 2025.
10. Grassi Advisors. “Tax Reform for Real Estate: What the One Big Beautiful Bill Means for Your Business.” July 2025.
11. Urban Land Institute. “July Economist Snapshot: What Will the Big Beautiful Bill Mean for Commercial Real Estate and Housing?” Urban Land Magazine, July 2025.
12. Grassi Advisors. “Tax Reform for Real Estate: What the One Big Beautiful Bill Means for Your Business.” July 2025.
13. EisnerAmper. “Opportunities and Enhancements for Real Estate in the One Big Beautiful Bill Act.” July 2025.
14. Kahn Litwin Renza. “Big Beautiful Bill Restores 100% Bonus Depreciation for 2025.” Tax Blog, 2025.
15. Kahn Litwin Renza. “Big Beautiful Bill Restores 100% Bonus Depreciation for 2025.” Tax Blog, 2025.
16. KBKG Tax Services. “One Big Beautiful Bill – 2025 Tax Changes and Summary Chart.” Tax Insight, July 2025.
17. Grassi Advisors. “Tax Reform for Real Estate: What the One Big Beautiful Bill Means for Your Business.” July 2025.
18. Buchanan Ingersoll & Rooney PC. “One Big, Beautiful Bill . . . Simplified.” Legal Analysis, 2025.
19. McGuire Sponsel. “What is Commercial Property and Real Estate Depreciation?” Tax Advisory Services, 2025.