Why This Key Tax Change Is a Game Changer for Business Owners and Property Investors
July 4th marked more than a celebration of independence. It also introduced sweeping tax changes that directly impact commercial real estate owners, tenants, and business operators.
The passage of the One Big Beautiful Bill (OBBB) reset and expanded several tax provisions through the Reconciliation process, allowing the legislation to pass with a simple majority vote. While the bill passed along partisan lines, it is now law, and some provisions apply retroactively to January 20th of this year.
Over the coming weeks, we’ll break down the sections of the law that matter most to real estate decision-makers. One provision stands out above the rest.
The Return of 100% Bonus Depreciation Explained
The most immediate impact comes from the restoration of 100% bonus depreciation, originally introduced under the Tax Cuts & Jobs Act of 2017.
Under those rules, businesses could fully deduct qualifying capital expenditures in the year the expense was incurred instead of depreciating them over the asset’s useful life. For example, a $30,000 HVAC system could be written off entirely in year one instead of $3,000 per year over ten years.
That provision significantly boosted business investment and economic activity.
Why Bonus Depreciation Has Been Phased Out
Because tax cuts passed through Reconciliation must include sunset provisions, 100% bonus depreciation was scheduled to phase out:
- 80% in 2023
- 60% in 2024
- 40% in 2025
With the passage of the OBBB, 100% bonus depreciation has been fully reinstated and made permanent, eliminating years of uncertainty around capital planning.
This permanence is critical. Businesses can now make long-term decisions with confidence instead of reacting to temporary tax windows.
Why Certainty Matters in Today’s Commercial Real Estate Market
Markets don’t just react to incentives; they react to certainty.
In recent years, commercial real estate activity slowed as business owners delayed decisions amid rising interest rates, inflation concerns, and shifting tax rules. Knowing the rules today and knowing they won’t disappear in a few years changes that behavior.
We expect this clarity to positively impact commercial real estate market activity, which has been constrained by hesitation from both buyers and tenants.
Anecdotally, we’re already seeing:
- Increased tenant and buyer inquiries
- More willingness to invest in build-outs and equipment
- Reduced resistance to long-term planning
As IRS guidance continues to be clarified, pent-up demand may accelerate, shortening time-on-market for both leased and for-sale properties.
A Practical Example: How Bonus Depreciation Drives Decisions
Consider a CNC machining business expanding from 10,000 to 20,000 square feet in 2025. The owner invests $200,000 in new machinery and electrical upgrades to meet growing demand.
At the same time, the landlord agrees to invest $70,000 in office and restroom improvements to accommodate the expansion.
Assuming both parties fall into the 37% federal tax bracket and elect to use 100% bonus depreciation:
- The tenant saves $74,000 in taxes, reducing the effective cost to $126,000
- The landlord saves $25,900 in taxes, reducing their cost to $44,100
Both parties see immediate benefits, and both are more likely to move forward with the deal.
This is a strong example of how tax incentives influence industrial real estate leasing and expansion decisions.
Who Benefits Most From 100% Bonus Depreciation
This change is especially impactful for:
- Capital-intensive manufacturing businesses
- Distribution and logistics operators
- Owner-users investing in equipment, racking, or machinery
- Landlords funding tenant improvements
Eligible assets often include:
- Machinery and equipment
- Electrical and HVAC upgrades
- Racking systems
- Forklifts and vehicles
Even businesses with modest improvement needs may see meaningful tax savings. These benefits are particularly relevant for owners engaged in long-term industrial real estate planning.
What Business Owners Should Do Now
At a minimum, business owners should immediately consult their tax advisors to understand how these changes affect current or planned expenditures.
This is especially important if you:
- Are considering a move or expansion
- Plan capital improvements
- Are negotiating tenant improvement allowances
- Own equipment-heavy operations
The savings are immediate and can materially change the economics of a deal.
Considering a Move, Expansion, or Capital Investment? Let’s Talk Strategy.
If tax changes like 100% bonus depreciation affect your real estate or operational decisions, a short conversation can help you evaluate timing, space needs, and market options.
👉 Talk to a Zehner Hill industrial real estate advisor.