3 Key Changes in The 'Big Beautiful Bill' That Could Affect Housing

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Key Takeaways

• The ‘One Big Beautiful Bill,” signed into law by President Donald Trump, has several provisions that affect the housing market.

• The legislation restores tax deductions for mortgage insurance.

• It also expands the low-income housing tax credit for builders who create affordable rental properties.

• Expanding state and local tax deductions could also benefit the housing market in some areas.

Several provisions in the tax and spending bill passed last week have the potential to help unlock the housing market.

President Donald Trump signed the “One Big Beautiful Bill” into law this weekend. The bill extends many provisions from the Tax Cuts and Jobs Act (TCJA), a major tax reform bill that Trump signed in 2017, that will affect the real estate market. It also has some new provisions that industry officials said could benefit the housing market.

“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,” said Shannon McGahn, National Association of Realtors executive vice president and chief advocacy officer, in a prepared statement.

Mortgage Insurance Deduction Could Lower Some Homeowners’ Taxes

The bill restores a deduction for mortgage insurance, which is generally used by homebuyers who put down a smaller down payment than required by mortgage lenders.

Taxpayers who qualified got an average deduction of $2,364 in tax year 2021, the last year that the mortgage insurance deduction was available to this group, according to the industry group U.S. Mortgage Insurers.

However, the legislation increases the standard taxpayer deduction to $15,750 for single filers, $23,625 for head of household and $31,500 for joint filers, while also limiting other itemized deductions.

The Bipartisan Policy Center said the higher standard deduction levels could limit the number of homeowners using the itemized mortgage interest deduction because few would have deductions larger than the standard amount.

Low-Income Housing Provision Could Lead to More Rental Properties

Another key provision in the bill expands the low-income housing tax credit for builders who create or rehabilitate rental housing for low- and medium-income renters.

“[The low-income housing tax credit] remains the nation’s most effective tool for building and preserving affordable rental housing,” said David Dworkin, president and CEO of the National Housing Conference. “These changes are expected to produce or preserve more than one million additional affordable rental homes between 2026 and 2035.”

The legislation will also make permanent Opportunity Zones, which provide tax incentives for to develop in certain low-income areas. The provisions come as low housing inventory has kept home prices out of reach for many Americans.

SALT Deductions Could Boost Housing Market in Some States

The new bill also increases the state and local taxes (SALT) deduction, which lets taxpayers deduct what they pay in state and local taxes from their federal tax return.

The bill increased the SALT deductions from $10,000 to $40,000, however the deduction will return to $10,000 in 2030. The Tax Cuts and Jobs Act (TCJA), a major tax reform bill that Trump signed in 2017, had set new, lower limits on SALT deductions.

These provisions mainly help high-income taxpayers in states that have high local taxes, in places like New York and California. While the bill doesn’t address housing policy specifically, officials said the increased deductions could help the housing markets in places with high local taxes.

“The cap enacted by the TCJA shifted some housing demand away from high-SALT areas, reducing average annual home price growth in those areas, with a disproportionate impact on the most expensive homes,” the Bipartisan Policy Center said.

The bill also made permanent other provisions that industry officials said would benefit the housing market, including the 20% deduction for qualified business expenses, as well as the business interest reduction for real estate property transactions.

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