Members of the housing industry may be breathing a sigh of relief after the U.S. House of Representatives passed the Republican-led budget bill Thursday morning, which preserved many current housing deductions and exclusions that were introduced as part of the Tax Cuts and Jobs Act during President Donald Trump’s first term.
Trump had pushed for the passage of the bill, which was dubbed the One Big Beautiful Bill Act in reference to a phrase Trump has used to express his preference for a single piece of sweeping legislation, instead of multiple bills targeting specific legislative areas.
Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), released a statement Thursday that the association was pleased that the bill kept in place the deduction for qualified residence interest and the homeowner exclusion on the gains from the sale of a principal residence. Currently, married couples who sell a principal residence can deduct $500,000 in price gains, while single individuals can deduct $250,000.
The bill preserves the deductibility of business interest for real estate and Section 1031 like-kind exchanges, which are swaps of one real estate investment property for another that allow capital gains taxes to be deferred. The property swaps are most often used by real estate agents, title companies and investors.
Broeksmit said the MBA also supported the bill’s expanded deduction for qualified business income under Section 199A of the tax code. The section provides a tax deduction for individuals with pass-through business income, potentially reducing their taxable income by up to 20%.
Other changes include the strengthening and expanding of the Low-Income Housing Tax Credit program and a new round of opportunity zones, a popular aspect of Trump’s first term in which businesses are offered a variety of tax benefits for investing in a qualified opportunity fund which, in turn, invests in an economically distressed community.
Also, under this version of the bill, state and local tax (SALT) deduction caps rise from the current level of $10,000 to $40,000.
“MBA is pleased that this bill includes numerous tax provisions that will help to increase real estate investment in communities and improve the financial outcomes of homeowners, renters and our members’ businesses,” Broeksmit said in a statement.
Of course, the 1,116-page bill now goes to the Senate, where it will undoubtedly be amended and changed. A compromise final version of the bill will have to be hammered out by both the Senate and the House before it heads to the president’s desk for his signature.
“MBA looks forward to engaging with the Senate on possible improvements to this House-passed reconciliation baseline as changes are considered and crafted,” Broeksmit said. “We will continue to advocate for our industry’s tax priorities throughout the debate this summer.”
