What if a single piece of legislation could instantly boost your cash flow, lower your taxes, and make it easier to pass your real estate portfolio to the next generation?
In real estate, tax law often acts like the soil beneath a property. Change the soil, and you change how the whole investment grows. That's exactly what has happened with the passage of Donald Trump's "One Big Beautiful Bill Act," signed into law on July 4, 2025.
The law contains a bold package of tax reforms that real estate investors, especially those focused on retail centers, strip malls, and mixed-use redevelopment, need to understand right now. While some proposals were modified during the legislative process, the core real estate provisions were passed and are now in effect.
In this article, we'll walk through the most relevant provisions for retail property owners, explaining what has changed, what has remained the same, and how investors can act now to maximize the benefits of the new tax environment.
What's In The Law: Key Changes For Real Estate Investors
The One Big Beautiful Bill Act includes a mix of retroactive and forward-looking changes. For retail property investors, here are the confirmed highlights now in effect:
- 100% bonus depreciation reinstated permanently for property acquired and placed in service after January 19, 2025.
- 20% pass-through income deduction (QBI) made permanent for qualifying entities.
- Estate and gift tax exemption increased to $15 million per person beginning in 2026, made permanent.
- 1031 exchanges and step-up basis provisions preserved.
- SALT deduction cap increased to $40,000 for qualifying taxpayers earning under $500,000 (2025-2029).
All provisions listed above were included in the final version of the law and are confirmed to apply in tax year 2025 and beyond, unless otherwise noted. We can now delve into each of these highlights to see what they offer for you and your investments.
How The New Law Affects Retail Real Estate Strategy
Let's break down what these changes mean for your investment planning, property operations, and exit strategies.
Bonus Depreciation: Upfront Deduction Back In Play
The return of 100% bonus depreciation means that retail property owners can immediately deduct the full cost of qualified improvements, such as new roofs, HVAC units, and tenant buildouts, in the year those expenses are incurred.
This provision applies to qualifying property acquired and placed in service after January 19, 2025, and is now permanent under the new law. This represents a significant change from the previous phasing schedule.
This can significantly enhance your after-tax cash flow, especially for value-add retail deals.
Permanent Pass-Through Deduction: Long-Term Certainty For LLCs And Partnerships
The law makes the 20% Qualified Business Income (QBI) deduction permanent for owners of pass-through entities that meet active business criteria under IRS guidelines.
Most retail real estate investments held in LLCs, partnerships, or S corporations will continue to benefit from these tax advantages. If your property produces $150,000 in net income, you can deduct $30,000 from your taxable income each year.
Previously scheduled to sunset at the end of 2025, this deduction now provides long-term predictability for retail investors with rental income operations.
Enhanced Estate And Gift Tax Planning: Improved Wealth Transfer
Beginning in 2026, the law increases the federal estate and gift tax exemption to $15 million per person (adjusted for inflation). This higher exemption is made permanent, as opposed to the previous temporary exemption that would have reverted to approximately $7 million.
This allows multi-generational retail real estate holdings to be transferred with significantly reduced federal tax exposure, giving families more freedom to maintain ownership of legacy assets, such as shopping centers or land holdings.
1031 Exchanges And Step-Up Basis Fully Preserved
Despite early speculation that these long-standing tax strategies might face reform, both 1031 like-kind exchanges and the step-up in basis rule were preserved in the final bill.
You can still defer capital gains when selling one investment property and reinvesting the proceeds in another. Heirs who inherit real estate continue to receive a stepped-up tax basis, which reduces or eliminates capital gains on previously appreciated property.
This is a major win for investors focused on long-term portfolio building and legacy planning.
SALT Deduction Cap Increase: Relief For High-Tax States
The state and local tax (SALT) deduction cap has been increased to $40,000 for taxpayers earning under $500,000 from 2025 through 2029, before reverting to the $10,000 cap in 2030.
The deduction phases out for taxpayers with higher incomes above the $500,000 threshold. While this primarily affects high-tax states, it can provide substantial additional tax relief for qualifying real estate investors in those jurisdictions.
What To Watch As You Adjust Your Strategy
Even though the law is now in effect, investors still need to operate with clarity and discipline. A tax-friendly environment can enhance a deal, but it doesn't replace the fundamentals.
Focus On Market Fundamentals First
Strong tenant demand, visibility, accessibility, and leasing upside still drive the value of retail assets. These changes can enhance margins, but ultimately, the location and local economics determine success.
Work With A Tax Advisor On Timing And Structure
Some of the bill's changes require proactive structuring to maximize benefits. A qualified CPA or real estate tax professional can help you reconfigure your entity choices or make the most of the new provisions.
Why This Matters To Retail Real Estate Investors
With the law now in effect, retail real estate investors are operating in one of the most tax-advantaged environments in recent memory. These changes create opportunities to:
- Increase cash flow through accelerated depreciation
- Reduce annual tax liability on rental income
- Scale portfolios with more efficient structuring
- Preserve intergenerational wealth without significant estate tax friction
- Take advantage of increased SALT deduction limits in applicable states
Key Takeaways For Investors
To help you quickly absorb the most actionable insights from the new law, here's a snapshot of what retail real estate investors need to know now.
- 100% bonus depreciation is now available permanently for property improvements acquired after January 19, 2025.
- The QBI pass-through deduction is permanent, supporting small to mid-size business owners.
- Estate and gift tax exemptions increase to $15 million per person beginning in 2026.
- SALT deduction caps have been increased to $40,000 for qualifying taxpayers through 2029.
- 1031 exchanges and step-up basis rules remain unchanged for long-term planning.
These changes are not just technicalities. They are real tools that, when paired with a sound investment strategy, can enhance portfolio performance and create a lasting financial impact.
The Opportunity Is Now For Utilizing These Advantages
With the One Big Beautiful Bill Act now the law of the land, the stage is set for retail real estate investors to take full advantage of a tax system designed to reward capital reinvestment, long-term ownership, and community revitalization.
This is a rare window to:
- Reassess your entity structures
- Plan for qualifying improvements under permanent bonus depreciation rules
- Realign your exit or succession planning strategies under new estate rules
- Optimize tax planning with increased SALT deductions where applicable
The policy has changed. Your opportunity to benefit from it starts now.
By aligning your investment strategy with the new rules now in effect, you can position yourself more effectively to grow, protect, and transition your retail real estate portfolio. The One Big Beautiful Bill Act presents a strategic advantage for those ready to use it wisely.
Topics:
