What the “One Big Beautiful Bill” Would Mean for Real Estate

There’s a major tax proposal in Washington that’s being dubbed the “One Big Beautiful Bill Act” – a sweeping tax and spending bill championed by President Trump. This bill recently narrowly passed the House of Representatives and is awaiting debate in the Senate. As you may already know, it’s generating a lot of buzz and controversy. For those in real estate, politics aside, the real question is: how would this bill impact investors, homeowners, and professionals in the housing sector?

What’s in the Bill? (Key Tax Changes)

At its core, the Big Beautiful Bill is aimed at extending the 2017 tax cuts that are otherwise set to expire after 2025. In other words, it would prevent many tax rates from rising back to pre-2017 levels. For example, the top income tax bracket would stay at 37% (instead of reverting to 39.6%), and other brackets would similarly remain lower than they’d be if current law expired. This means individuals and businesses would continue to enjoy the lower tax rates introduced under the Tax Cuts and Jobs Act (TCJA) beyond 2025. Lawmakers supporting the bill say this avoids an automatic tax hike on millions of Americans.

Another headline change in the bill is an increase to the SALT deduction cap – that’s the deduction for “State And Local Taxes.” Since 2017, taxpayers could only deduct up to $10,000 of their state/local taxes on their federal return, which hit residents of high-tax states (like California, New York, New Jersey) pretty hard. The new bill would raise that cap significantly, allowing a deduction of up to $40,000 for state and local taxes (for taxpayers under a certain income level). In high-tax areas such as the Bay Area’s Santa Clara and San Mateo counties, this could provide noticeable relief, because many homeowners pay well above $10k in combined property and state income taxes. Under the bill, a lot more of those taxes would become deductible, potentially saving thousands of dollars per year for some households. (We should keep in ming that very high earners might not get the full $40k deduction – the cap would phase down for incomes over $500k – but it’s still a big jump from the old $10k limit.)

Big Benefits for Real Estate Investors and Small Business Owners

For real estate investors and business owners, there are several important provisions:

• 100% Bonus Depreciation is back. The bill would restore full bonus depreciation through 2029, meaning investors can immediately write off 100% of the cost of qualifying property or improvements in the year of purchase. This tax incentive had started phasing out (it dropped to 80% in 2023 and was heading to 0% by 2027), but the new legislation would reset it to 100% for a few more years. In plain language: if you buy a rental property or do a major renovation, you could potentially deduct the entire cost in the first year, significantly reducing your taxes in the short term. That’s a big win for real estate folks using strategies like cost segregation to accelerate depreciation.

  
  

• Pass-Through Business Deduction extended (and increased). Small business owners, including many real estate LLC owners and landlords, currently get a 20% tax deduction on their qualified business income (this is the Section 199A deduction from the 2017 tax law). The new bill not only extends this break past 2025 but actually bumps it up to a 23% deduction for eligible income. This helps “pass-through” entities (like LLCs, S-corps, partnerships) keep more of their profits, leveling the playing field since big C-corporations got a large tax rate cut in 2017. In short, many real estate investors who hold properties in an LLC would continue to get a sizable chunk of their rental income tax-free, and a bit more than before.

  
  

• Higher Estate Tax Exemption. The bill would raise the federal estate tax exemption to about $15 million per person (up from roughly $12–14 million now). Practically speaking, this means almost no one (except the ultra-wealthy) would owe federal estate taxes – even large family real estate portfolios could be passed to heirs with minimal estate tax, as long as the total estate value is under $15 million per individual. This change may not affect the average investor, but it’s reassuring for the fortunate few with very high net-worth or generational real estate holdings.

  
  

• Section 179 Expensing Gets a Major Boost. In addition to bonus depreciation, the bill also expands Section 179 expensing limits. Real estate businesses would be able to immediately expense up to $2.5 million of qualifying assets (up from just over $1 million today), with a phase-out starting at $4 million. This applies to items like HVAC systems, roofs, and non-structural property improvements. For landlords or property managers making major updates, this change could offer additional short-term tax savings and more flexible planning around asset purchases.

  
  

• Excess Business Loss Limitation Becomes Permanent. Another provision worth noting is that the bill would make permanent the limitation on excess business losses for non-corporate taxpayers. That means certain real estate investors who used to offset large losses against other income (such as W-2 wages or spousal income) may now face an annual cap. For investors who rely heavily on depreciation and paper losses in their tax planning, this could limit some of the flexibility they’ve enjoyed under prior rules.

Beyond those, the bill has a grab-bag of other provisions: it creates new “Trump Accounts” (a special savings account for kids born 2024–2028, with a $1,000 government contribution to jump-start it), makes tips and overtime pay tax-free up to certain limits, and tweaks some education and family tax credits. It also modifies electric vehicle tax credits, scaling back some of the generous EV purchase incentives put in place in recent years. (This EV angle may be one reason Elon Musk voiced opposition!) Additionally, there’s money in the bill for border security and other non-tax measures, making this package a mix of tax cuts and policy priorities.

What’s Not Included

It’s worth noting some ideas that were floated for this bill but ultimately did not make it in (at least in the House’s version). Real estate investors will breathe a sigh of relief that 1031 exchanges were untouched – there was no change to the like-kind exchange rules. Despite occasional talk in Washington of scaling back Section 1031 (which allows deferring capital gains tax when you swap investment properties), the current bill leaves 1031 exchanges fully intact. So investors can continue to swap real estate holdings without immediate tax bills, a strategy widely used in the industry.

There was also no overhaul of depreciation recapture. Earlier discussions hinted at possibly easing the tax hit when depreciation is recaptured upon sale, but the bill doesn’t contain major shifts there (any minor tweaks are technical and unlikely to affect most investors in a significant way). Opportunity Zones – the program offering tax benefits for investing in designated low-income areas – were not curtailed either. In fact, the bill appears to extend the Opportunity Zone program’s timelines, ensuring those incentives remain available for years to come. This means developers and investors still have the chance to deploy capital into OZ projects and enjoy deferral or even elimination of certain gains, encouraging more investment in those communities.

The updated Opportunity Zone framework also includes several enhancements. A new round of OZ designations would launch from 2027 to 2033, with a requirement that at least one-third be rural. Investors in these “Rural Qualified Opportunity Funds” would receive extra tax advantages, including a 30% step-up in basis after five years. The bill also proposes simplified investment rules and stronger reporting standards, which could improve transparency while making OZ participation more attractive in undercapitalized areas.

Lastly, although housing affordability is a hot topic, the bill does not introduce new housing credits or subsidies to directly address it. Proposals like a first-time homebuyer credit or new affordable housing incentives were left on the cutting-room floor. The one related measure included is a modest expansion of the existing Low-Income Housing Tax Credit (LIHTC) program, which increases the allocations to states by about 12.5% for a few years. This could spur a bit more affordable housing development via the LIHTC, but it’s a relatively small adjustment. In short, no sweeping housing affordability program is in this bill – it’s mainly focused on tax rate extensions and business tax breaks, rather than new help for homebuyers or renters.

Supporters’ Arguments: Lower Taxes and Economic Boost

Proponents of the Big Beautiful Bill argue that it’s necessary to prevent an impending tax increase on American workers and businesses. If the 2017 cuts expire, they say, it would effectively be one of the largest tax hikes in U.S. history (since rates would snap back up across the board). By extending the tax cuts, the bill “locks in” the current tax rates so people can keep more of their paychecks. Republican leaders also emphasize that many small businesses would benefit. For example, family-owned businesses and independent contractors would continue to get relief through the 23% pass-through income deduction and other perks, allowing them to invest more in growth and jobs instead of sending money to Uncle Sam.

Another key argument is that lower taxes will stimulate economic growth. This is the classic supply-side or “trickle-down” theory: letting individuals and companies keep more money should lead to more spending, hiring, and investing, which boosts the whole economy. Supporters predict the tax cuts could “unleash” growth, potentially raising GDP, wages, and employment. They often point to the strong economy in 2018–2019 after the first round of Trump tax cuts as evidence (though economists debate how much of that was due to the tax policy). In terms of real estate, keeping taxes low on middle-class families can help consumer confidence and their ability to save for down payments, while business tax breaks like bonus depreciation can encourage development and investment in properties. Raising the SALT deduction cap is also a popular move in expensive, high-tax states. Real estate professionals in places like California and New York noted that the $10k SALT cap put a damper on high-end home sales and made homeownership less attractive at the margin in those markets. Increasing the cap to $30k or $40k could remove some of that drag, potentially giving a boost to housing demand in regions such as the Bay Area that were squeezed by the old cap. In short, backers of the bill say it will keep the economy growing and avoid rocking the boat with tax hikes in 2026.

Critics’ Arguments: Deficit Concerns and Skewed Benefits

On the flip side, critics warn that this bill would blow up the federal deficit and primarily help the wealthy. The nonpartisan Congressional Budget Office (CBO) estimated the House-passed version would add roughly $3.8 trillion to the national debt over the next decade. That figure already accounts for some assumed economic growth – in other words, even with growth, the government would be trillions deeper in the red. Opponents find this alarming given that the U.S. debt is already at record highs (over $36 trillion total). They argue that piling on more debt is dangerous: it can drive up interest rates, fuel inflation, and leave a bigger burden for future generations. Some financial analysts note that if government borrowing balloons, it could put upward pressure on bond yields and mortgage rates – not great news for real estate in the long run, since higher interest rates make loans and mortgages more expensive. In essence, skeptics say the bill is handing out tax goodies now but could lead to economic pain later.

Another criticism is that the benefits tilt toward higher-income individuals and corporations. Provisions like the estate tax boost and the pass-through deduction mainly help those with substantial assets or business income. While middle-class workers do get something (for instance, continued lower income-tax brackets and child tax credits), analysts point out that the biggest dollar gains from extending the 2017 tax cuts would accrue to top earners. The SALT cap increase, too, chiefly helps people who itemize deductions and pay high property or state taxes – often a wealthier subset of taxpayers.

Final Words

In summary, the “One Big Beautiful Bill” represents a major extension of Trump-era tax policy with some new twists. Real estate players stand to gain from several provisions: restored bonus depreciation, continued pass-through deductions, a higher SALT write-off (especially relevant in pricey locales like San Mateo or Santa Clara County), and no new restrictions on beloved tax strategies like 1031 exchanges. If you’re a Realtor, investor, or developer, you should be aware of these potential changes and consider how they might alter your tax planning and market conditions in the coming years. Of course, it’s not law yet – the Senate could revise parts of it, and anything can happen in the sausage-making process of legislation. There’s also the ethical and macroeconomic debate: are the short-term benefits worth the long-term costs? As a neutral observer, here is what I know now: the bill promises significant tax relief for those in real estate (among others), but it also raises concerns about fiscal sustainability. Keep an eye on Congress in the next few weeks. Should this bill (or some version of it) become law, real estate professionals will want to consult their tax advisors and adjust strategies to fully take advantage of the new rules.

References:

• Reuters – House passes “One Big Beautiful Bill Act” by one vote; CBO says it adds $3.8 trillion to debt.

• Reuters – Elon Musk slams the bill as “a disgusting abomination,” reflecting deficit concerns among some Republicans.

• Reuters – SALT deduction cap raised to $40,000 in House tax plan (up from $10k), benefiting high-tax states like CA.

• NAHB– Key real estate provisions in the bill: 199A pass-through deduction to 23%, estate tax exemption $15M, 100% bonus depreciation restored, Opportunity Zones extended.

• rReuters – Nonpartisan analysis (CBO) of House tax bill’s cost: would add about $3.8 trillion to federal debt over 10 years.

• Bipartisan Policy Center – Low-Income Housing Tax Credit increased by 12.5% (2026–2029) in the House bill, to support affordable housing development.

• NAHB – Provisions ending or phasing out residential energy tax credits (e.g. home solar and efficiency credits) as part of the bill’s cost-saving measures.

• CliftonLarsonAllen (CLA) - Provisions in Proposed "One, Big, Beautiful Bill" May Impact Real Estate