7.7.26 Milwaukee Chapter Meeting

Milwaukee Chapter July Meeting Key Take Aways!

• The OBBBA strengthens many of the existing tax advantages for commercial real estate rather than creating an entirely new tax landscape. The emphasis is on improving cash flow, investment returns, and long-term planning.
• Permanent 100% Bonus Depreciation is one of the most significant benefits, allowing owners and investors to immediately deduct qualifying assets. This creates:
  • Larger first-year tax deductions
  • Improved project cash flow
  • Greater value from cost segregation studies
  • Increased after-tax returns on acquisitions and renovations
• Cost segregation studies should be revisited. Properties that have been recently acquired or renovated may generate additional tax savings through accelerated depreciation.
• Section 179 Expensing allows more equipment purchases to be deducted immediately, benefiting:
  • Property owners
  • Construction companies
  • Property management firms
  • Owner-operators investing in equipment and building improvements.
• Interest expense deductions have become more favorable, improving the economics of debt-financed projects. Developers and investors should review financing assumptions and update project underwriting models to reflect improved after-tax cash flow.
• Pass-through entities continue to benefit through the permanent 20% Qualified Business Income deduction, providing:
  • Greater tax certainty
  • Lower effective tax rates
  • Improved long-term profitability for LLCs, partnerships, and S corporations.
• Opportunity Zones receive renewed long-term support, with:
  • The program becoming permanent
  • New Opportunity Zones beginning in 2027
  • Continued tax incentives for long-term investments
  • Additional opportunities for rural redevelopment and capital gain planning.

Practical Impact for the CRE Industry

• Property Owners should reevaluate existing assets and planned capital improvements to maximize available deductions.
• Developers can benefit from stronger project economics, greater financing flexibility, and increased confidence when underwriting future developments.
• Investors have additional opportunities to improve after-tax returns through depreciation strategies and Opportunity Zone investments.
• Lenders may see borrowers with stronger cash flow and improved debt-service coverage, potentially supporting additional lending activity.
• Brokers could benefit from increased acquisition, redevelopment, and renovation activity as tax incentives encourage investment.
• CPAs and Attorneys have an opportunity to move beyond tax compliance and proactively advise clients on strategies that maximize the benefits of the new legislation.

Questions Every CRE Business Should Be Asking

• Are current acquisitions structured to maximize bonus depreciation?
• Should we perform or update a cost segregation study?
• Should planned renovations or tenant improvements be accelerated?
• Do revised interest deduction rules improve project feasibility?
• Does an Opportunity Zone investment fit our long-term strategy?
• Is our current ownership entity still the most tax-efficient?

Bottom Line

The presentation emphasized that the One Big Beautiful Bill Act does not fundamentally change commercial real estate taxation—it enhances many of the incentives that have historically driven investment. The greatest value comes from proactively reviewing current projects, financing structures, and long-term investment strategies to capitalize on these permanent tax provisions. Businesses that revisit projects already in the pipeline may uncover meaningful opportunities to improve cash flow and overall investment returns.