- The corporate tax rate for manufacturers could drop from 21% to 15%, but higher tariffs may increase CRE construction costs.
- The qualified business income deduction (Section 199A) may be repealed, raising taxes on REITs and pass-through entities.
- Changes to bonus depreciation, interest deductions, and SALT caps could alter tax strategies for property owners and investors.
As parts of the 2017 Tax Cuts and Jobs Act (TCJA) near expiration, proposed tax modifications under the Trump administration could impact US commercial real estate, per GlobeSt.
A Deloitte analysis highlights six key changes, ranging from corporate tax rates to deductions affecting REITs and pass-through entities.
Corporate Tax Changes
One of the most significant proposals involves lowering the corporate income tax rate for US manufacturers from 21% to 15% while introducing high tariffs to encourage domestic production.
While a lower tax rate could benefit some CRE sectors, Deloitte warns that higher tariffs could raise construction and development costs, increasing financial strain on new projects.
Potential Rate Hikes
The qualified business income deduction (Section 199A), which currently provides a 20% tax deduction for domestic business profits—including REIT dividends—could be repealed.
If this happens, REITs and pass-through entities would be taxed at the individual rate, raising tax liabilities for CRE owners. Deloitte categorized this as having a high impact on the industry.
Get Smarter about what matters in CRE
Stay ahead of trends in commercial real estate with CRE Daily – the free newsletter delivering everything you need to start your day in just 5-minutes
Digging Deeper
Several medium-impact tax changes could also reshape CRE investment strategies:
- Interest Deduction, Section 163(j) – If the limit on net business interest expense is calculated using earnings before interest, taxes, depreciation, and amortization (EBITDA) instead of EBIT, some real estate firms could regain deductions by adding back property depreciation.
- Bonus Depreciation, Section 168(k)—The current 100% bonus depreciation will be phased out by 2026. Some lawmakers want to reinstate it, which could benefit CRE owners who invest in land improvements, furniture, and qualified improvement property.
- State and Local Tax (SALT) Deduction – The $10K cap on SALT deductions expires this year. Trump proposed eliminating the cap, which could benefit high-tax state investors. If the cap remains, many CRE professionals will likely use pass-through entity-level tax strategies to offset the impact.
One low-impact proposal involves raising the Section 179 expensing limit from $1M to $2M. However, since long-lived real property is generally ineligible, this change is unlikely to significantly affect CRE.
Looking Ahead
With tax policy jumping from 11th place in 2024 to 5th in 2025 in Deloitte’s CRE outlook, the industry is bracing for potential legislative changes.
If these proposals move forward, REITs, pass-through entities, and developers may need to adjust their tax strategies to navigate the shifting landscape.
