Tax Bill's Housing Market Impact Written by John Giaimo Realty Times Publisher

The recently signed "One Big Beautiful Bill Act" is expected to have a mixed impact on consumer home buying and selling, with some provisions favoring certain segments of the market more than others. Here's a breakdown of how it might affect consumers:

Positive Impacts for Some Homeowners and Buyers:

Increased SALT Deduction Cap: A significant change is the temporary quadrupling of the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 (for 2025-2029). This will primarily benefit homeowners in high-tax states and affluent areas, as they can deduct a larger portion of their property and state income taxes. This could "supercharge demand" in already desirable, high-cost markets and potentially ease financial pressure for some homeowners, freeing up funds for other expenses, including home-related ones.

Permanent Lower Individual Tax Rates: The bill makes the current lower individual tax rates permanent and indexes them for inflation. This generally means more disposable income for taxpayers, which could improve affordability for prospective homebuyers.

Permanent Mortgage Interest Deduction: The bill permanently extends the mortgage interest deduction (with the $750,000 indebtedness limit). This remains a crucial benefit for both current and future homeowners, making homeownership more financially attractive.

Increased Child Tax Credit: The child tax credit is temporarily increased to $2,500 (2025-2028). This can provide additional financial support to families, potentially aiding with housing affordability.

Estate and Gift Tax Exemption: The permanent increase in the estate and gift tax exclusion amount (to $15 million per person, inflation-adjusted) supports generational wealth transfer, which can indirectly impact the housing market by preserving family wealth that might be used for home purchases.

Less Impact or Potential Challenges for Others:

Limited Benefit for Lower-Income Buyers and Renters: While some provisions aim to help, experts suggest the bill offers less direct support for lower-income renters and first-time buyers who are already facing significant affordability challenges due to high mortgage rates, prices, and costs.

Increased Demand in Affluent Areas: The higher SALT deduction cap might intensify demand in areas where affordability is already strained and inventory is low, potentially driving prices up further in those markets.

Impact on Rental Market (Indirect): While the bill expands the Low-Income Housing Tax Credit (LIHTC) and tweaks opportunity zone incentives, which could increase the supply of affordable rental housing, the immediate impact on overall rental costs for consumers may vary.

Business Benefits Primarily: Many provisions, such as permanent qualified business income deductions, bonus depreciation, and R&D expensing, are primarily geared towards businesses and real estate investors, which could fuel more investment in residential and commercial property. This could lead to more development, but also potentially increase competition for individual buyers.

In summary, the "One Big Beautiful Bill Act" seems to prioritize tax relief that could significantly benefit higher-income homeowners and real estate investors, while offering more indirect or limited immediate benefits for lower-income individuals and first-time homebuyers. The increased SALT deduction is a key provision that could reshape affordability dynamics, especially in high-tax regions.