Inside Washington: Tax Reform, Incentives and the 2026 Political Landscape

By Eric Schmutz | September 9, 2025

At CRE.Converge in Toronto, NAIOP’s Senior Director of Federal Affairs Eric Schmutz dove into the latest federal legislation impacting the commercial real estate industry.

The session centered on a major win for the commercial real estate industry: the One Big Beautiful Bill Act signed this summer. The legislation makes several important provisions permanent while introducing new incentives designed to support investment, development and economic growth.

Among the tax incentives and extensions included in the bill:

• Bonus Depreciation: Starting Jan. 20, 2025, businesses can permanently expense 100% of costs for equipment, machinery, leasehold and nonresidential interior improvements.
• Section 199A Deduction: The 20% deduction for pass-through business income is now permanent, benefiting millions of small businesses and real estate partnerships.
• Business Interest Deduction: The EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)-based limit under Section 163(j) is permanently extended, supporting full expensing for leasehold improvements.
• Opportunity Zones: Opportunity zone tax incentives are now permanent, with added benefits for rural zones.
• Low-income Housing Tax Credit: States receive a 12% increase in LIHTC allocations, and bond financing requirements are reduced.
• New Markets Tax Credit: Permanently extended to support investments in underserved communities.
• Factory Expensing: A temporary 4-year 100% expensing benefit for new owner-occupied factories, starting in 2025.
• State and Local Taxes (SALT): The deduction cap increases to $40,000 in 2025, with inflation adjustments through 2029.