Higher SALT Deduction Cap (Temporary)
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State Tax Write-Off Boost: The cap on state and local tax (SALT) deductions (which include property taxes and state income taxes) will increase from the current $10,000 to $40,000 per year, starting in 2026. However, this higher cap is not permanent – it applies for tax years 2026 through 2029. Beginning in 2030, the cap is set to revert back to $10,000 unless further legislation intervenes.
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Key Details and Impact: For many real estate investors, property taxes are a major expense. A higher SALT deduction limit means investors in high-tax states or those with multiple properties can deduct a greater portion of their state and local tax payments from their federal income. This could reduce taxable income for some investors by allowing an extra $30,000 of deductions annually. There is a caveat: households with Adjusted Gross Income above $500,000 won’t get the full benefit – for them the deduction increase phases out, effectively keeping the cap at $10k for the highest earners. Overall, this is a temporary but welcome change that slightly lessens the federal tax cost of owning property in high-tax jurisdictions for the next few years.
R&D Expensing (Temporary Restoration)
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Immediate Write-Off for R&D Costs: A notable business provision in the OBBBA is the return of full expensing for Research & Experimentation (R&E) expenditures. Starting in 2025, companies can once again deduct 100% of their domestic R&D expenses in the year incurred. This reverses the recent rule (from 2022) that required spreading R&D costs over five years. The law even allows retroactive relief: small businesses (average gross receipts ≤ $31 million) can elect to write off R&D costs from 2022–2024 that they had been forced to amortize. (Note: Foreign R&D expenses still must be amortized over 15 years
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Why It Matters: While real estate investors may not be heavy in “R&D” themselves, this change benefits any investor-owned businesses engaged in development, technology, or innovative design (for example, firms creating new construction technologies or software). If you have ventures outside pure real estate, the ability to currently deduct research costs could improve those businesses’ cash flow. For the broader economy (and indirectly for real estate), R&D expensing is expected to incentivize more investment in innovation. Keep in mind this provision is permanent for domestic R&D – it essentially “fixes” the issue going forward, which is a positive development for businesses in many sectors.
Energy-Efficient Commercial Buildings Deduction (Section 179D) Ending
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179D Sunset: Real estate investors involved in energy-efficient building projects should be aware that the Section 179D deduction will be phased out. The law provides that for any commercial building projects beginning construction after June 30, 2026, the energy-efficient building deduction (179D) will no longer be available. In other words, to claim 179D deductions under current rules, construction must start by that mid-2026 deadline. This accelerates the termination of a tax incentive that was recently expanded by prior legislation.
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Planning Implications: Section 179D has been a popular tax break for installing energy-efficient HVAC, lighting, and building envelope systems in commercial properties. With a sunset now on the horizon, investors and developers should adjust their timelines accordingly. Projects that incorporate significant energy efficiency components may need to break ground before July 2026 to secure the deduction. Some may consider pulling forward planned retrofits or new constructions to lock in the 179D benefit while it’s still available. After 2026, investments in green building features will have to rely on other incentives (federal or state) as this particular federal deduction will no longer offset those costs.
