TL/DR –
The One Big Beautiful Bill Act passed by the U.S. House of Representatives aims to make permanent the tax cuts that were passed in 2017. The Act includes provisions that could impact the housing market, such as an increase in the tax deduction for state and local taxes to $40,000, changes to bonding requirements and the expansion of opportunity zones. However, there are concerns that the bill could increase the federal deficit and potentially lead to higher interest rates for homeowners.
Key Takeaways
- The proposed bill increases the SALT deduction to $40,000 in the House version, but retains the current $10,000 cap in the Senate draft.
- Modifications to bonding requirements and opportunity zone expansion may foster affordable housing projects.
- The proposed bill could heighten the federal deficit, triggering concerns about potential interest rate hikes for homeowners.
The One Big Beautiful Bill Act, approved by the U.S. House of Representatives in May, aims to implement comprehensive changes to federal tax policy. Senate leaders and administration officials are urging Republican lawmakers to pass the bill so President Donald Trump can sign it into law before July 4. The bill seeks to make the 2017 tax cuts permanent and contains several provisions that could potentially impact the housing market.
Real estate professionals warn that the bill might bolster the real estate market in the short term but could also lead to a rise in national debt and affect long-term affordability for lower- and middle-income families. They also highlight the challenges of predicting the final details of the bill due to daily narrative changes.
Impact on Homeowners and the Housing Market
- Greater tax deduction for wealthy homeowners.
- Potential elimination of energy-efficient updates.
- Bonding changes may pave the way for new developers.
- Incentive programs could stimulate affordable housing.
- Consumers may have less disposable income for home purchases.
Increased Tax Deduction for Wealthy Homeowners
The bill is likely to benefit high-income homeowners by permanently reducing tax brackets and potentially increasing property tax deductions. The House version raises the SALT deduction from $10,000 to $40,000 for those with annual incomes up to $500,000, potentially stimulating the luxury market. However, it is still uncertain whether the $40,000 cap will be included in the final bill as the Senate draft proposes maintaining the current $10,000 cap.
Potential Elimination of Energy-Efficient Credits
While the SALT deduction may increase, homeowners might lose tax credits for energy-efficient upgrades to their properties. Both the House version and the Senate draft of the bill propose eliminating these credits.
New Opportunities for Developers
The prospective bill could relax bonding requirements for public housing projects, potentially enabling more developers to embark on such projects and expand affordable housing options.
Stimulating Affordable Housing with Incentive Programs
The bill could also incentivize affordable housing development through opportunity zones, low-income housing tax credits, and new market tax credits. According to experts, opportunity zones have resulted in an additional 350,000 housing units in designated areas since 2019. The House bill and Senate draft both include opportunity zones, with the House stipulating a 2033 end date.
Potential Decrease in Consumer Home Buying Power
Industry insiders express concerns that the proposed bill could trigger inflation, thereby increasing interest rates and affecting housing affordability. The Congressional Budget Office estimates a potential $2.4 trillion increase in federal deficits over a 10-year period. The bill also includes spending cuts to food assistance and Medicaid programs, which could mean households have less money for housing or saving for a future home purchase.
The bill must be approved by the Senate and reconciled with the House version before it can be sent to President Trump for his signature.
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