As I start to unravel some of the provisions of this One Big Beautiful bill, I have narrowed down the aspects that particular to real estate and our current market. Remember, this is my opinion. I am not a lawyer or part of any policy group or a political ‘hack’. I am just an agent trying to lead us all to better understanding of what has been published so you can talk with your professional legal and accounting team as an informed buyer or seller.
This bill is massive and has many items that could impact the real estate professional, investor and homeowners. Our friends in the military may also find some benefit from what I have uncovered. So my approach will be as it was once said in the movies: “Just the facts, Jack!”
Some of the key items in the bill that should be of interest are key changes, who benefits and who it may impact. I also try to call out the effective dates, since many believe this all is in effect now and that is not true. So in no particular order, here is what I see:
Let me start with the military:
The military housing privatization oversight provision tightens oversite on housing companies. There will be stricter inspections, habitability and maintenance standards. Base operators like Lincoln, Balfour Beatty, etc. may start to invest more in upkeep or risk of losing contracts. There could be more operators enter the market!
VA Loan Streaming & Fee Cap will cap the origination fees for VA loans and speeds up appraisals and approvals. VA will also have money to modernize the loan technology systems and portals. This could help the Veteran homebuyers get faster approvals and lower our of pocket fees. This will certainly help more veterans to enter the housing market!
Base Realignment and Rural Housing Grants will include grants incentives for real estate development near newly aligned or expanding military bases. This is designed to support infrastructure and multi-family housing projects that can accommodate growing base populations.
This should benefit developers and investor near my benefit from grants or tax breaks to build or convert housing. Also, it will boost housing markets in the area of these installations.
Permanent Housing Allowance Exemption from Taxable Income This will make the Basic Allowance for Housing (BAH) permanently tax-free, and will include provision to allow for calculation eligibility for income-based programs.
This should be a benefit to military families by keeping more of their house income, VA loan eligibility expands for those stationed in expensive areas,
Increase Funding for Military Housing Renovation & Construction will appropriate over $2.5 billion modernization of military family housing across bases in US and overseas. A lot of focus will be placed on substandard housing, mold, HVAC problems and other issues that have plagued military housing units.
We could see a larger pool of bidders to do these upgrades. And more important improved quality of life for our enlisted families and fewer relocation issues.
As we look more into the general areas of real estate buying and selling. The impacts could be significant. The following are areas of the bill to watch if you are in the general market to buy or sell real estate. In the area of NJ where I operate we were interested to see the SALT deduction boost.
The State and Local Tax known as SALT will see a deduction boost from $10,000 to $40,000 for joint filers earning up to $500,000. This will be effective for tax years 2025 through 2029, with 1% annual inflation adjustment.
Who benefits is limited to NY, CA and NJ. and high income earners with large property and income tax bills. Remember that low tax states get no real benefit and there is a potential for increased wealth disparity.
The Mortgage Interest Deduction (MID) provision will cap permanently set at $750k. This was originally to expire in 2026 and it immediately was effective when the bill was passed with no sunset date!
As a homeowners in the expensive markets like CA, NY and NJ with big mortgages, and high income earners who itemize deductions. That’s the good news, but on the negative side of the ledger, Renters and First Time Home Buyers could face challenges if this provision pushes the demand up of housing.
QBI (or better known as the Pass through) Deduction increased from 20 to 23% permanently for qualified business income. The effective date applies to tax years beginning January 1, 2205. Our real estate investors using LLCs or partnerships are celebrating this win. And the real estate agents gain some benefit on the pass through. It will harm w-2 employees and widens the gap between incorporated investors and regular earners.
100% Bonus Depreciation and Section 179 Expensing just became an exciting tool for those writing off qualified property. 100% can be immediately written off under the bonus depreciation and under Section 179 expense limits increased to $2.5 million: phase out starts at $4million.
This goes into effect for property acquired and placed in service after Jan 18, 2025 through Dec, 31, 2029.
These provisions arguably are of the interest of real estate investors and landlord who make upgrades to property like HVAC, appliances and roofs. Home flippers and developers who buy, improve and sell quickly just saved a lot of capital gain money. But small investors and tenants who do not have readily expendable income may left in the dust of the big boys!
The Low Income Housing Tax Credit was expanded by 12.5% with a 4% bond financing threshold dropping from 50% to 25%. This is effective now and has no set expiration date.
The affordable income housing developer, investors and loc income renters will have more options and money here. But market rate landlords and property owners in already low demand markets will face pressures from overbuilt housing options.
And finally, the Clean Energy Tax Credit Repeals like solar, home efficiency and clean vehicles, etc. will take a hit 180 days after the enactment for most, however, some will continue until end of 2025 and expire.
The big thing here is that developers and builders will no longer be required to meet costly green standards. And homeowners will have more options than the expensive eco-upgrades that were once required. Green energy companies and those who are eco-conscious will feel the pain for sure, but resale without these desirable items will face reduced values.
All in all there is something for all those involved in real estate. Those who benefit will be those in high cost states, investors, developers in affordable housing, rural investors, landlords willing to make improvements, estate planners and heirs, and our military personnel.
Those who may be harmed will be renters, green home builders and owners, no profits, buyers in climate sensitive areas and first time buyers.
With so much to unpack in this bill, these are items for the real estate minded buyer and seller to look at closer to see how it may effect you and your plans. My job is to help keep you informed and point you in the direction of making qualified decisions as part of your team. Please feel free to reach out to me for this and more real estate advice.
