The Big Beautiful Bill: What 100% Bonus Depreciation Means for CRE Investors

Congress is advancing a new tax bill that, if passed, would mark a meaningful win for commercial real estate. While the Senate has yet to approve the final version, the framework already signals a shift toward policy that supports long-term investment and operational discipline. At Hammer & Hampel, we see this as a direct tailwind to the kind of value-add work we’re already doing in markets like Iowa.

The most impactful provision is the restoration of 100% bonus depreciation for the years 2025 through 2029. Under current law, bonus depreciation was declining annually—set to drop to just 20% by 2026. The new bill halts that slide, restoring full first-year expensing for another five years. For groups actively improving properties and running cost segregation studies, that means a larger up-front tax shield, better net-of-tax cash flow, and more efficient returns without taking on excess risk.

But bonus depreciation is just the start. The bill also keeps 1031 exchanges and carried interest rules intact, preserving two of the most important tools in a real estate investor’s arsenal. By deferring capital gains through 1031 exchanges and allowing promote income to be taxed as long-term capital gains, these provisions protect liquidity and support reinvestment—especially critical in today’s higher-rate environment.

Another key feature is the increase of the Qualified Business Income (QBI) deduction to 23% and its permanent extension. For sponsors structured as pass-through entities like Hammer & Hampel, this directly improves bottom-line tax efficiency. It rewards the structure we already use and supports ongoing reinvestment into our portfolio rather than siphoning capital off to the IRS.

These tax benefits come at a cost. The bill is projected to add between $2.6 and $4.3 trillion to the federal deficit over the next ten years, a move that could push Treasury issuance higher and pressure long-term interest rates upward. But while rising rates remain a reality, we’ve already structured our acquisitions with fixed-rate or conservatively underwritten debt. What the bill offers is a meaningful offset to that pressure—especially for value-add deals where depreciation schedules can move the needle.

We’re already evaluating how this change will enhance several of our existing and upcoming Iowa acquisitions. In some cases, we expect it to reduce investor tax exposure by double digits in year one. This doesn’t just improve IRRs—it improves cash-on-cash predictability and reduces drag on reinvestment capital. It’s a structural edge we plan to maximize.

From our perspective, this tax framework doesn’t change the need for rigorous underwriting or asset-level discipline—it reinforces it. These provisions amplify the upside for sponsors who are already operating with tight cost controls, clear financial reporting, and conservative leverage. They don’t bail out weak deals. But they do enhance well-structured ones.

If the bill passes, the window for high-quality, tax-efficient acquisitions expands. And at Hammer & Hampel, we’re prepared to act—leveraging these tools to drive performance, protect downside, and build long-term value in the communities we invest in.

If you’re interested in learning more about investing alongside us in Iowa visit our website, Hammerandhampel.com.