How the 2026 Tax Law Impacts Property Owners: OBBBA Explained
For years, the real estate community expected a wave of tax increases to arrive in 2026. Many of the provisions from the 2017 Tax Cuts and Jobs Act (TCJA) were scheduled to expire, and investors anticipated higher income taxes, reduced deductions, and a general tightening of incentives that support commercial real estate.
That expectation shifted dramatically on July 4, 2025, when the One Big Beautiful Bill Act (OBBBA) became law. Instead of reverting to pre-TCJA rules, the new legislation extended several key benefits, restored others that had begun phasing out, and offered long-term clarity for property owners.
Below is a breakdown of the provisions investors should understand, along with what these changes mean for those who own or are preparing to transition real estate—and how Medalist Diversified REIT can help you use this new landscape to your advantage.
Major OBBBA Provisions Affecting Real Estate
Individual Income Tax Rates Remain Lower
Before OBBBA, the top tax bracket was set to return to 39.6 percent in 2026. The new law keeps the TCJA rate structure in place, retaining a top bracket of 37 percent.
What this means for property owners:
Owners of rental real estate, pass-through business income, and REIT dividends can plan on permanently lower marginal rates, improving overall after-tax income and cash flow.
The 20 Percent Pass-Through Deduction Is Now Permanent
One of the most meaningful changes for property owners is the permanent extension of the 20 percent Qualified Business Income (QBI) deduction.
This applies to:
• income from rental real estate held in pass-through entities
• dividends paid by REITs
The result is a far lower effective tax rate on REIT dividends and rental income, especially for investors in upper brackets.
Full Bonus Depreciation Restored and Made Permanent
Under prior law, bonus depreciation was winding down and would have disappeared by 2027. OBBBA reverses that trajectory, restoring 100 percent bonus depreciation and making it permanent.
What this means:
• immediate expensing of eligible improvements
• continued value from cost segregation studies
• enhanced ability for REITs to shield dividends with depreciation
For property owners and REIT shareholders alike, this translates into more tax-deferred income.
Higher SALT Deduction Cap for Moderate-Income Taxpayers
The original $10,000 cap on State and Local Tax (SALT) deductions was especially challenging for investors in high-tax states. OBBBA raises the cap to $40,000 for taxpayers under $500,000 of income.
For many real estate owners, this restores meaningful deductibility of property taxes and state income tax.
1031 Exchanges and 721 UPREIT Contributions Preserved
There was significant speculation that like-kind exchanges would be curtailed or eliminated. Instead, OBBBA protects Section 1031 for real property and clarifies that 721 UPREIT contributions remain fully permissible.
This provides long-term clarity for:
• investors who use 1031 exchanges to reposition portfolios
• owners contributing appreciated assets into REIT operating partnerships
• families seeking tax-efficient estate transitions
With both pathways protected, property owners retain the two most important tools for tax deferral in commercial real estate.
What These Changes Mean for Investors
More Predictable Planning
OBBBA removes much of the uncertainty surrounding the 2026 sunset date. With income tax rates, depreciation rules, and major real estate incentives secured, investors can make decisions with a clearer view of long-term outcomes.
Enhanced After-Tax Cash Flow
Permanent QBI deductions and full bonus depreciation help investors keep more of their income and accelerate return on equity.
Flexibility Through 1031 and 721 Paths
With both strategies protected, owners can continue to:
• defer taxes through 1031 exchanges
• convert real estate into diversified REIT ownership via 721 UPREIT structures
Estate Planning Options
Although the estate tax exemption still declines in 2026, the combination of REIT shares, OP units, and DST interests gives families tools for simple transfers and tax-efficient planning.
How Medalist Diversified REIT Helps Investors Benefit From OBBBA
OBBBA creates a highly favorable environment for real estate ownership, and Medalist is positioned to help investors use every advantage available.
Tax-Efficient Dividend Income
Medalist uses depreciation, cost segregation, and bonus depreciation across its portfolio to keep a portion of distributions tax-deferred. Permanent QBI treatment ensures REIT dividends remain taxed at significantly lower rates than ordinary income.
Permanent Bonus Depreciation at the Portfolio Level
With 100 percent bonus depreciation restored, Medalist can accelerate deductions on improvements and acquisitions. This enhances shareholder tax efficiency and increases the likelihood that dividends include return of capital.
721 UPREIT Participation
Property owners can defer capital gains taxes by contributing real estate to Medalist’s operating partnership in exchange for OP units.
Benefits include:
• diversification across a broader portfolio
• passive income instead of active management
• potential step-up in basis for heirs
• optionality for future liquidity
DST Opportunities for 1031 Investors
Medalist’s DST programs offer institutional-grade properties for those completing 1031 exchanges.
DST investors benefit from:
• stable, predictable income
• professional management
• low-minimum reinvestment thresholds
• the option to later convert DST interests through a 721 exchange
This structure gives owners immediate tax deferral with long-term flexibility.
Build a Private or Family REIT
Medalist also helps families and operating partners build customized REIT platforms that:
• house portfolios under institutional governance
• create scalable capital structures
• simplify succession and estate planning
• unlock public or private market capital over time
This can transform a multi-property portfolio into a permanent wealth platform.
A New Era of Tax Stability for Property Owners
The year 2026 was widely expected to bring higher taxes and reduced incentives. Instead, the One Big Beautiful Bill Act ensured that many of the most valuable real estate benefits remain in place.
For owners, this is an opportunity to reevaluate how real estate fits into long-term plans—whether through income, estate strategy, diversification, or liquidity.
Medalist Diversified REIT is structured to help you capture the full advantage of these laws, whether through REIT ownership, DST participation, or a 721 contribution of your real estate.
