Big Beautiful Bill: What the New Tax Law Means for Homeowners

The "One Big Beautiful Bill" has officially become law after passing both the Senate and House. This major tax legislation brings significant changes for homeowners and the real estate market. Here's what you need to know about how this new law affects your taxes and home-related finances.

Your Mortgage Interest Deduction is Now Permanent

The mortgage interest deduction is now permanently protected. If you currently deduct mortgage interest on your tax return, you can continue doing so without worrying about future changes. This removes years of uncertainty that surrounded this popular tax benefit.

The National Association of REALTORS® (NAR) made this a top priority, and 91% of Americans support preserving this deduction according to their polling.

Property Tax Deduction Gets Much Bigger

SALT Cap Increases Dramatically

Starting in 2025, something called the SALT deduction cap jumps from $10,000 to $40,000 for five years.

What's SALT? It's simply the taxes you pay to your state and local government. This includes your property taxes, state income taxes, and local taxes. Right now, you can only deduct up to $10,000 of these taxes on your federal return.

If you live in a high-tax state, this change matters significantly. States like California, New York, and New Jersey have residents who often hit that $10,000 limit quickly. The higher cap means you can deduct much more of these taxes.

However, this increase is temporary. After five years, the cap drops back to $10,000 unless Congress acts again. NAR's polling showed 61% support for raising or eliminating SALT deduction caps.

Family Tax Benefits

Child Tax Credit Grows

The Child Tax Credit increases to $2,200 per child and adjusts for inflation each year. Families with children will see this reflected in their tax returns, either through reduced taxes owed or larger refunds.

This extra money might help with housing costs, though the actual benefit depends on your income level and tax situation.

Estate Tax Threshold Jumps

The estate tax exemption increases to $15 million, adjusted for inflation. Most homeowners won't reach this threshold, but it affects families with valuable real estate portfolios or significant assets.

Business Owner Benefits

Business Income Deduction Becomes Permanent

The 20% qualified business income deduction is now permanently part of the tax code. This affects self-employed people, including real estate agents, freelancers, and small business owners.

Here's how it works: if you qualify, you can deduct 20% of your business income. For someone earning $100,000 from their business, that's a $20,000 deduction. This reduces the income you pay taxes on.

NAR's polling found 83% support for this business income deduction.

Investment Property Rules Protected

The law preserves something called 1031 like-kind exchanges. This is a tax rule that lets real estate investors swap properties without immediately paying capital gains taxes.

Here's a simple example: if you sell one rental property for $300,000 and buy another rental property for $300,000, you don't have to pay taxes on any profit right away. This keeps existing investment strategies working.

Housing Supply and Development

Builder Incentives Included

The legislation includes tax breaks for home builders. They can immediately write off research and development costs and get better depreciation on equipment.

The National Association of Home Builders praised the law. Chairman Buddy Hughes said: "This legislation will help spur economic growth and allow our members to invest more resources in multifamily rental construction, land development to build more single-family homes, and new equipment to expand their businesses."

Affordable Housing Support

The law permanently includes Low-Income Housing Tax Credit provisions to support affordable housing development across the country.

Opportunity Zone Renewal

Opportunity Zones get renewed with stronger incentives. These zones encourage investment in underserved communities. If you live in one of these areas, you might see more development activity.

Who Benefits Most

High-Tax State Residents

If you live somewhere with high property taxes or state income taxes, the SALT deduction increase gives you significant relief. Remember, SALT covers all your state and local taxes combined. However, you'll need to plan for when this benefit expires in five years.

Current Homeowners

Anyone with a mortgage benefits from the permanent interest deduction. If you itemize deductions, you might see changes to your tax bill depending on your state and local tax situation.

First-Time Buyers

Lower individual tax rates continue, and the Child Tax Credit increase might free up money for housing costs. NAR's polling showed 92% support tax-free savings accounts for first-time home buyers, though this specific provision wasn't included in the final law.

Investment Property Owners

The preserved 1031 exchanges and business deductions maintain current tax advantages. Opportunity Zone benefits might create new investment possibilities.

Industry Reaction

NAR successfully secured all five of their legislative priorities in this law. NAR's Chief Advocacy Officer, Shannon McGahn, said: "These provisions form the backbone of the real estate economy, from supporting first-time and first-generation buyers to strengthening investment in housing supply and protecting existing homeowners."

The real estate industry sees this as a major victory. NAR's polling conducted in May showed overwhelming bipartisan support for real estate-friendly provisions:

• 92% support tax-free savings accounts for first-time home buyers
• 91% support preserving the mortgage interest deduction
• 86% support maintaining lower income tax rates
• 83% support the 20% business income deduction
• 61% support raising or eliminating SALT deduction caps

What This Means for Your Planning

Immediate Changes

Most provisions take effect immediately, but the SALT deduction increase doesn't start until 2025. This gives you time to plan your tax strategy accordingly.

Long-term Considerations

The mix of permanent and temporary provisions creates planning challenges. For example, the temporary SALT deduction increase means you'll need to prepare for its expiration. As a reminder, SALT covers all your state and local taxes - property taxes, state income taxes, and local taxes combined.

The permanent mortgage interest deduction provides certainty, but other aspects of your tax situation might change.

Next Steps for Homeowners

These changes affect everyone differently based on income, state of residence, and how you file your taxes. You should consider reviewing your tax strategy with a professional, especially given the temporary nature of some provisions.

The law represents significant changes to homeownership tax policy. Whether these changes help your specific situation depends on your individual circumstances, but the real estate industry clearly views this as beneficial legislation.

Bottom Line

The "One Big Beautiful Bill" is now law and contains multiple provisions affecting homeowners and the real estate market. Some changes are permanent, others temporary. The actual impact depends on your individual circumstances.

NAR achieved all their major goals with this legislation, calling it crucial support for the real estate economy. Homeowners should understand how these provisions apply to their specific circumstances and plan accordingly for both the immediate benefits and future changes when temporary provisions expire.