President Donald Trump’s tax and spending cuts bill that narrowly passed the U.S. Senate on Tuesday includes a provision that could provide a boost to commercial real estate investors.
The Senate reconciliation version of Trump’s megabill, which headed to the U.S. House of Representatives for possible changes, would permanently restore a full 100 percent bonus depreciation for real estate assets acquired and placed in service after Jan. 19, 2025. A previous House bill that advanced would have included the 100 percent depreciation for five years.
The bonus depreciation policy, which was first enacted under the Tax Cuts and Jobs Act of 2017, had begun to phase out in 2023 and was set to expire in 2027. It’s geared toward enabling businesses to deduct the full cost of qualifying assets the year they were placed in service as a tool to create more capital investments from freed-up liquidity, according to Glen Kunofsky, founder and CEO of net-lease-focused CRE firm Surmont. Kunofsky has aggressively lobbied Congress for the policy’s inclusion in the bill.
Kunofsky said he expects the House to adopt the permanent restoration of the 100 percent bonus depreciation in the final bill that heads to the White House — which he stressed would provide important clarity for developers and tenants when mapping out future CRE investments. The previous 2017 tax overhaul had a 100 percent bonus depreciation from 2018 to 2022 before falling to 80 percent in 2023, 60 percent in 2024, and 40 percent this year.
“You don’t get to benefit until the property goes into service, so people over the last couple of years were anticipating a two- to three-year development process where they wouldn’t get any benefit,” said Kunofsky of the 100 percent depreciation policy’s phase-out process. “Having it permanent is a huge, huge win for commercial real estate.”
Kunofsky noted that the issue is crucial for the CRE industry, given rising construction costs and higher interest rates since the Federal Reserve began raising borrowing costs in early 2022 to combat inflation. He said bonus depreciation for CRE properties helps landlords lower upfront costs and has been a big catalyst for spurring increased development of data center and car wash projects over the last few years.
As part of the lobbying process over the last two years, Kunofsky engaged with leading tax policy lobbyists in Washington, D.C. including Brendan Dunn, who was a tax adviser to former Senate Majority Leader Mitch McConnell (R-Ky.) when the 100 percent bonus depreciation policy was crafted into the 2017 Republican tax bill. Kunofsky also met often in the nation’s capital with the entire Senate Finance Committee to educate lawmakers on the issue’s importance to CRE and the U.S. economy.
“The story was really resonating with how it impacts people in their districts and what type of jobs and buildings could be created by having this incentive,” Kunofsky said. “A lot of this goes to Main Street and small communities where tenants now have an incentive to build because the tenant has the incentive that they get to write off everything under 15 years of property in the first year, so it de-risks the initial investment significantly.”
Another key CRE provision in the Senate bill approved Tuesday involves permanently extending the Opportunity Zone incentives program for developers to build in economically underserved areas in exchange for a break on capital gains tax. The legislation would also expand low-income housing tax credits.
The Senate bill needed a tiebreaker vote from Vice President J.D. Vance in order to advance and give hope for getting adopted before a July 4 deadline set by Trump. The Senate would need to vote again on any changes the House makes to the bill as the House and Senate versions are reconciled.
