Big Beautiful Bill Win For Homeowners

 

• What the One Big Beautiful Bill Means for Real Estate and You

·         Overall, OBBB was a big win for real estate: it extended and/or permanently enshrined many tax breaks for homeowners, property investors, and Realtors. The NAR (National Association of Realtors), NAHB (National Association of Home builders), and MBA (Mortgage Bankers Association) all loved it.

Let’s a take a closer look at the relevant provisions:

• Permanent extension of the 2017 (Tax Cuts and Jobs Act) personal income tax rates, which were scheduled to sunset after 2025. The highest marginal tax rate will remain at 37%, with inflation adjustments (protecting more income from taxes) for the 10%, 12% and 22% brackets. The standard deduction was also permanently increased (nearly doubled!) to $15,750 for single filers and $31,500 for joint filers. There is an additional $6000 deduction for seniors through 2028.
• Permanent protection for mortgage interest deduction. This significant tax benefit for homeowners (especially in the early years of a mortgage), is now unassailable. The maximum mortgage debt (on which all mortgage interest is deductible) remains set at $750,000.

  A temporary (5-year) quadrupling of State and Local Tax (“SALT”) deductions. The previous SALT deduction was $10,000. Now most people will be able to use up to $40,000 of state and local taxes paid to reduce federal taxable income. If you own a big home in a state/municipality with high state income and/or property tax rates, this could be a major benefit.

  Permanent protection for 1031 exchanges. These ‘like kind’ exchanges — used extensively by property investors — allow for the deferral of capital gains taxes on properties sold, as long as a home of equal or greater value is purchased within a few months of the sale date.

   Permanent enhancement of the Low-Income Housing Tax Credit. The LIHTC program encourages private-sector investment in affordable housing by offering a 10-year stream of tax credits, reducing reliance on government-financed construction. Under OBBB, the total amount of tax credits available was significantly expanded.

•   Permanent protection for qualified business income deductions. Small business owners, gig workers and real estate agents can continue to deduct up to 20% of their ‘qualified business income’ from federally taxable income. This deduction was set to expire after 2025. Now it’s permanent.
• ‘Trump Accounts’ can be used for down payments. Every child born between 2025–2028 will get a $1,000 tax-deferred savings account (invested in index funds) with parents able to contribute up to $5,000 annually tax-free. At 18, the account converts into an IRA. These accounts can be used for education expenses or to make a down payment on a home.
• Note: While this IS NOT part of the OBBB, it’s also important to track the recently introduced No Tax on Home Sales Act (H.R. 4327) which, if passed, would eliminate capital gains taxes on the sale of a primary residence. In addition to saving millions of homeowners tens of thousands of dollars each, it could also increase the supply of homes for sale (by removing a powerful disincentive to sell).