What the 2026 Tax Law Means for Real Estate Owners: A New Era Under the One Big Beautiful Bill Act (OBBBA)
The real estate world was bracing for sweeping tax hikes in 2026. The Tax Cuts and Jobs Act of 2017 (TCJA) had many provisions set to expire, threatening higher rates, fewer deductions, and reduced incentives for real estate investment.
But everything changed on July 4, 2025, when the One Big Beautiful Bill Act (OBBBA) became law. This sweeping legislation makes many of the TCJA’s pro-growth tax provisions permanent, while also restoring and enhancing key benefits for investors. For real estate owners and commercial investors, the new landscape is far more favorable than what was expected just months ago.
I explore the major provisions of the OBBBA, what they mean for commercial real estate owners, and how investing with Medalist Diversified REIT can help you thrive in this new tax environment.
Key Provisions of the OBBBA Affecting Real Estate
1. Individual Tax Rates Stay Lower
Under prior law, top personal tax rates were set to jump back up to 39.6% in 2026. OBBBA permanently extends the lower TCJA rates, with the top bracket capped at 37%.
What this means: Real estate investors—both those holding properties directly and those receiving REIT dividends—can count on permanently lower income tax rates, helping preserve after-tax cash flow.
2. The 20% Pass-Through Deduction Is Permanent
One of the biggest victories for real estate is that the 20% Qualified Business Income (QBI) deduction is now permanent, including for REIT dividends.
Why it matters:
Rental income from partnerships, LLCs, and other pass-throughs remains eligible for the 20% deduction.
REIT dividends also continue to receive the deduction, meaning investors’ effective tax rate on ordinary REIT dividends stays at about 29.6% instead of 37% for top earners.
This change locks in one of the most important tax advantages for commercial real estate owners and REIT investors.
3. 100% Bonus Depreciation Restored and Made Permanent
Before OBBBA, bonus depreciation was phasing out—set to fall to 20% in 2026 and disappear entirely by 2027. OBBBA reversed course, restoring 100% bonus depreciation and making it permanent.
What this means for investors:
Immediate expensing of qualified improvements, equipment, and short-lived building components.
Cost segregation studies will continue to unlock powerful tax shields, often turning taxable income into tax-deferred return of capital.
REITs like Medalist can maximize these deductions at the portfolio level, ensuring a portion of dividends remain tax-deferred for shareholders.
4. SALT Deduction Relief
While the original $10,000 cap on state and local tax (SALT) deductions was crushing for many investors, OBBBA raised the cap to $40,000 for taxpayers with incomes under $500,000.
For real estate owners in high-tax states, this means greater deductibility of property taxes and state income tax, easing the total tax burden.
5. 1031 Exchanges and 721 UPREIT Transactions Protected
There was concern that like-kind exchanges might be capped or eliminated. Instead, OBBBA protected Section 1031 for real estate and even clarified the legality of 721 UPREIT contributions (exchanging property for REIT operating partnership units).
This provides stability:
Investors can continue deferring capital gains through 1031 exchanges.
Property owners can contribute assets to Medalist through a 721 exchange, deferring taxes while converting into diversified REIT ownership.
What This Means for Real Estate Investors
For both individual and institutional investors, OBBBA creates a friendlier tax environment than expected:
More Certainty – Investors can plan confidently knowing tax rates, deductions, and depreciation rules aren’t set to expire in 2026.
Higher After-Tax Cash Flow – Permanent QBI deductions and bonus depreciation enhance net returns.
Liquidity Options – 1031 and 721 remain viable, ensuring flexibility when repositioning or transitioning portfolios.
Estate Planning – While the estate tax exemption still drops in 2026, the ongoing ability to use REIT shares and UPREIT structures helps families simplify wealth transfers.
How Medalist Diversified REIT Helps You Capitalize
At Medalist Diversified REIT (NASDAQ: MDRR), we see the One Big Beautiful Bill Act (OBBBA) as a turning point for real estate investors. With lower taxes locked in, permanent bonus depreciation, and REIT dividend deductions secured, this is the moment for owners to rethink how they hold and grow their wealth. Medalist provides multiple pathways to capitalize:
Tax-Efficient Dividends
With permanent QBI treatment and strategic use of depreciation, Medalist distributions remain highly tax-efficient. Investors often receive a portion of dividends as return of capital, which is tax-deferred until shares are sold.
Permanent Bonus Depreciation
Our acquisitions and improvements will continue generating upfront tax shields, translating into tax-deferred distributions for shareholders. Medalist actively uses cost segregation and bonus depreciation to maximize these benefits across the portfolio.
721 UPREIT Contributions
Property owners can defer capital gains by contributing appreciated assets into Medalist’s operating partnership in exchange for OP units. This provides:
Liquidity – Convert a single asset into diversified REIT ownership.
Diversification – Spread risk across a professionally managed portfolio.
Estate Simplicity – Units can be inherited with a step-up in basis.
DST Benefits
Through Delaware Statutory Trusts (DSTs), Medalist also offers investors the ability to 1031 exchange into institutional-quality real estate while preserving tax deferral. Medalist’s DSTs are designed with:
Stable Income – Backed by long-term, creditworthy tenants.
Optional Path to Liquidity – Investors can later UPREIT DST interests into Medalist shares.
Estate Flexibility – DSTs simplify ownership and can align with long-term family wealth planning.
Build Your Own REIT
Medalist goes beyond offering shares—we help families and sponsors institutionalize their wealth by building their own REIT platforms. Through our structure, property owners can:
Pool Assets into a scalable platform.
Access Capital Markets more efficiently than selling property-by-property.
Transform Legacy Portfolios into permanent, income-producing vehicles that endure across generations.
Strategic Certainty
We actively manage our portfolio with tax law in mind, so our investors benefit from proactive, tax-aware decision-making. Whether you come in through a DST, a 721 exchange, or direct share ownership, Medalist ensures your capital works in the most tax-efficient way possible.
Conclusion
2026 was supposed to be the year real estate investors faced higher taxes, reduced deductions, and fewer deferral tools. Thanks to the One Big Beautiful Bill Act, the opposite is true: the tax environment for real estate is stronger than ever.
For investors, that means now is the time to position your portfolio to take advantage of these permanent benefits. Whether through direct investment or via a 721 exchange into Medalist, you can maximize income, preserve capital, and simplify your estate planning.
Medalist Diversified REIT stands ready to help you turn today’s tax certainty into tomorrow’s lasting wealth.
