OBBBA Complete 2025-2026 Update: Every Tax Change for Real Estate
Public Law 119-21, the One Big Beautiful Bill Act (OBBBA), was signed July 4, 2025 and restored permanent 100% bonus depreciation under Section 168(k) for property acquired after January 19, 2025. The Section 179 cap rose to $2.5 million with a $4 million phaseout. Section 168(n) Qualified Production Property was added. The Opportunity Zone program was extended through 2033. IRS Notice 2026-11 provides the interim implementation guidance.
Section 168(k) bonus depreciation restored to permanent 100%
OBBBA's centerpiece change. Amended Section 168(k) restored 100% bonus depreciation permanently for qualified property acquired and placed in service after January 19, 2025. The legacy phase-down (40% in 2025, 20% in 2026, 0% in 2027 and after) still applies to property under a binding contract on or before January 19, 2025.
The cliff is the most important date in the legislation for real estate investors. Property under a binding contract signed January 19, 2025 or earlier remains under the phase-down regardless of closing date. Property under a binding contract signed January 20, 2025 or later qualifies for permanent 100%.
Section 179 expensing cap raised to $2.5 million
OBBBA raised the Section 179 dollar limitation to $2.5 million (from $1 million under prior law) and the phaseout threshold to $4 million (from $2.5 million). The cap reduces dollar-for-dollar with qualifying property in excess of $4 million, reaching zero at $6.5 million of qualifying property.
Qualifying property includes tangible personal property, off-the-shelf software, qualified improvement property, and certain nonresidential real property improvements (roofs, HVAC, fire protection, alarm and security systems). Residential rental real estate generally does not qualify for Section 179 because it is not a trade or business under the active-conduct standard.
Section 168(n) Qualified Production Property
OBBBA added new Section 168(n) for nonresidential real property used in qualified production. The property qualifies for 100% bonus depreciation if construction begins after January 19, 2025 and before January 1, 2029, and the property is placed in service before January 1, 2031.
Qualified Production Property covers manufacturing facilities, certain agricultural production property, and other production-related nonresidential real property. The provision creates a real-property bonus depreciation pathway that did not previously exist. IRS Notice 2026-16 provides the QPP-specific implementation guidance.
Section 168(k)(10) 40% election option
OBBBA added Section 168(k)(10), permitting a taxpayer to elect 40% bonus depreciation (60% for long-production-period property and certain aircraft) for the first tax year ending after January 19, 2025. The election preserves net operating loss absorption capacity for later years where 100% would otherwise waste an NOL.
The election is class-by-class and irrevocable for the year. Make the election via attached statement to the return. Coordinate with your CPA before electing.
Opportunity Zones extended through 2033
OBBBA extended the Opportunity Zone deferral end date from December 31, 2026 (the original TCJA end date) to December 31, 2033. The program was also extended for new investment through 2033. Investments made before that date qualify for the full set of deferral, partial exclusion, and 10-year complete exclusion benefits.
The extension matches the bonus depreciation permanence theme of OBBBA. Combined with cost segregation on QOZB real estate, the OZ structure remains a high-leverage tax planning vehicle for investors with capital gains to deploy.
Used property and the five-year lookback
Used property qualifies for 100% bonus depreciation under amended Section 168(k) subject to a five-year acquisition lookback rule. The lookback prevents related-party or repeat-purchase abuse. Property the taxpayer or a related party owned in the previous five years does not qualify as new.
Most third-party real estate acquisitions easily satisfy the five-year lookback. The rule mainly affects related-party transactions and structured deals designed to refresh the bonus depreciation clock.
Frequently asked questions
- How does WeCostSeg coordinate with my CPA?
- Every engagement follows the three-touch CPA Coordination Protocol. We send a preliminary analysis to your CPA on intake, share the draft report five business days before final delivery, and coordinate Form 3115 filing timing when a Section 481(a) adjustment applies. Your CPA never pays a fee.
- Does this analysis assume 100% bonus depreciation under OBBBA?
- Yes for property acquired with a binding contract on or after January 20, 2025 under Public Law 119-21. Property under a binding contract on or before January 19, 2025 stays on the legacy phase-down: 40% bonus in 2025, 20% in 2026, 0% in 2027 and after.
- Is the five-year audit defense included?
- Yes. Every WeCostSeg engagement includes five years of written audit defense at no extra cost. The defense aligns to the 13 Principal Elements of a Quality Cost Segregation Study under IRS Publication 5653 Chapter 4.
- Can I get a free preliminary analysis?
- Yes. Submit your property details via the free proposal form or WhatsApp. Our engineer returns a written estimate of your first-year deduction within four business hours during US Eastern hours. No payment, no contract.
- When was OBBBA signed?
- Public Law 119-21 was signed July 4, 2025. The acquisition cutoff for the new 100% bonus regime is January 19, 2025. Property under a binding contract on or before that date stays on the legacy phase-down.
- What does Notice 2026-11 cover?
- IRS Notice 2026-11 (January 14, 2026) provides interim guidance on the additional first-year depreciation deduction under amended Section 168(k). It covers transition rules, the binding contract definition, and the 40% election mechanics.
Zawwad Ul Sami, Founder
Zawwad Ul Sami is the founder of WeCostSeg, a founder-led cost segregation firm serving real estate investors across the US. He focuses on strategy, pricing, and the firm's overall direction.