Unlocking Opportunity: What Borrowers Need to Know About the New Tax Bill and Multifamily Housing
As the landscape of U.S. tax legislation continues to evolve, the recent changes from the One Big Beautiful Bill Act (OBBBA) offer a new set of implications and opportunities for borrowers in the multifamily housing space. According to a webinar hosted by Citrin Cooperman titled “The One, Big, Beautiful Bill Analysis,” several key provisions of the bill carry meaningful benefits for developers, owners, and investors in multifamily assets.
New Incentives for Residential Developers
One of the most exciting developments for the multifamily market is the expanded exemption from the percentage-of-completion method under Section 460. Previously, this exemption applied only to home construction. Now, it includes long-term residential construction contracts, such as those for condominiums and apartment complexes. This change significantly improves cash flow by deferring taxable income recognition, which is particularly helpful for mid-sized developers who meet the gross receipts test and can complete projects within a few years.
Clarity and Permanence on Entity Choice
The bill reopens the long-standing debate between C-corporations and pass-through structures. The permanence of the qualified business income deduction under Section 199A continues to make pass-throughs attractive. At the same time, enhanced Section 1202 stock exclusions make C-corporations more viable for those considering future exits or liquidity events. For multifamily sponsors contemplating capital structuring or exit planning, this shift presents new opportunities to optimize tax positioning.
The Return of Bonus Depreciation and Expensing
Bonus depreciation has returned alongside a new category called Qualified Production Property. While this primarily targets manufacturing, the reinstatement of full expensing for eligible real estate and equipment acquisitions beginning in the coming years adds another lever for multifamily borrowers focused on property improvements or expansions. Strategic timing of construction and acquisitions could translate into meaningful tax savings.
Charitable Giving with a Twist
For owners with philanthropic interests, the revamped charitable contribution rules now include both a floor and a ceiling for deductions, with enhanced carryforward options. More notably, non-itemizers can now take limited deductions as well. These changes may influence giving strategies for family-owned firms or socially conscious borrowers aligned with community development efforts.
State and Local Tax (SALT) Flexibility Returns
A significant cap increase for SALT deductions through the end of the decade, especially when paired with continued pass-through entity tax workarounds, brings welcome relief to high-tax state borrowers. Developers based in jurisdictions like New York and California can now better manage their state tax exposure, preserving capital for reinvestment or debt service.
Enhanced Capital Gains Exclusions
The QSBS exclusion has been improved by raising the exclusion cap and easing holding period requirements. For borrowers structured as corporations or with equity-based exit strategies, this offers a compelling incentive for long-term investment in eligible entities.
Cleaner Planning Environment for Estate Transfers
Owners with succession or generational wealth planning needs will benefit from the permanent increase in the estate and gift tax exemption. This added flexibility in wealth transfer planning supports long-term stability for family-run enterprises or partnerships planning a transition.
Conclusion: Strategic Planning is Essential
The new tax bill is not just reform; it is a prompt to revisit structure, timing, and strategy. Multifamily borrowers who align their business models with these changes will be positioned to realize meaningful advantages, especially in capital-intensive, long-term investments. The path forward begins with thoughtful planning and collaboration with your entire team of advisors about how you can apply these shifts in order to elevate your next deal, refinance, or development initiative.
The information provided in this article, including, without limitation, any opinions, predictions, forecasts, commentaries or suggestions, is for informational purposes only and should not be construed to be professional or personal investment, financial, legal, tax or other advice.