Many industry leaders, analysts, and pundits have broadly considered how the Trump administration’s and GOP-majority Congress’ plans might affect commercial real estate.
The Deloitte Center for Financial Services focused on the question of taxes. More specifically, they looked at six key parts of the Tax Cuts and Jobs Act of 2017 (TCJA), which is set to expire by the end of this year, and the likely implications on domestic and global CRE.
The firm’s annual CRE outlook indicated that tax policies have jumped in importance from 11th place in 2024 to 5th in 2025. That seems likely with the governmental focus and the increased chance of passing tax legislation.
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The first aspect is the corporate income tax rate, section 11(b). In 2017, the TCJA reduced the top corporate rate from 35% to 21%. Trump has talked about cutting the rate to 15% for domestic manufacturers and use high tariffs to bring more manufacturing back to the U.S. Deloitte said continuation of a lower tax environment with added tariffs “could increase real estate construction and development costs.” According to data about corporate profits after taxes and corporate taxes from the Bureau of Economic Analysis, the overall realized tax rate in Q3 2024 was 12.7%. Deloitte categorized this as having a high impact.
The second high-impact aspect is the qualified business income deduction from section 199A. The TCJA provided a 20% deduction for domestic business profits, subject to some limitations, with the same rate applied to qualified REIT dividends. The current plan is to repeal the deduction with pass-through income to be taxed at the individual rate. If implemented, CRE owners operating as REITs and with passt-hrough entities would take a tax hit.
The first of three medium-impact parts is the treatment of business interest payments under 163(j). For purposes of the 30% limit on deductions of net business interest expense, the taxpayer calculated the adjusted taxable income based on earnings before interest and taxes (EBIT). There isn’t a scheduled change but there is talk about basing the calculation on earnings before interest, taxes, depreciation, and amortization (EBITA). Real estate companies that haven’t “elected to be excluded from the interest expense limitations as real property trades or businesses” could be able to add property depreciation back into the calculation.
The second medium-impact tax consideration is 100% bonus deprecation under section 168(k). That rate started to phase down in 20% increments starting in 2023. Bonus depreciation is set to phase out completely by the end of 2026. Some lawmakers have wanted to restore the amount. CRE property isn’t eligible for it, but owners can use bonus depreciation on other types of assets, like land improvements, furniture, fixtures, and qualified improvement property.
The third medium-impact part is the SALT state and local tax deduction with a current $10,000 cap. The limitation expires at the end of this year. Trump proposed ending the cap for the full deduction. Should the cap remain, even at an increased level, people involved in CRE would probably use pass-through entity-level tax strategies to reduce the impact.
Finally, comes the one low-impact area of small business election to expense depreciable assets in section 179. Currently, there is a $1 million limit in a single year on eligible property. It phases out when the qualifying property exceeds $2.5 million in value. Though there’s no scheduled change, Trump proposed a $2 million expensing limit. However, qualified assets for 179 expensing generally don’t include long-lived real property.
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