The National Association of REALTORS® (NAR) has reviewed the first draft of the 2025 tax reform bill and considers it highly favorable for the real estate industry. Here’s a simplified summary of the key provisions:
Key Benefits for Real Estate Professionals and Homeowners
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Increased Pass-Through Deduction: The Qualified Business Income (QBI) deduction rises from 20% to 23%, benefiting over 90% of NAR members who are independent contractors or small business owners.
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Expanded SALT Deduction: The cap on State and Local Tax (SALT) deductions triples from $10,000 to $30,000 for households earning under $400,000. However, the marriage penalty remains, meaning both single filers and married couples filing jointly can deduct up to $30,000.
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Permanent Lower Individual Tax Rates: Current lower individual tax rates are made permanent and indexed for inflation, aiding taxpayers and improving affordability for prospective homebuyers.
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Mortgage Interest Deduction (MID) Preserved: The MID is maintained at its current level and made permanent, continuing to support homeowners and housing market stability.
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Protection of 1031 Like-Kind Exchanges: Section 1031 exchanges, crucial for real estate investors, remain unchanged, allowing for tax-deferred property exchanges
💼 Additional Provisions Supporting the Real Estate Economy
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Child Tax Credit Increase: The credit increases to $2,500 from 2025 through 2028, then indexes for inflation starting in 2029, providing additional support for families.
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Estate and Gift Tax Threshold: The exemption is set permanently at $15 million (adjusted for inflation), aiding in generational wealth transfer.
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No Increase in Top Tax Rate: The proposed 39.6% top rate was removed, maintaining current tax rates for high earners.
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Low-Income Housing Tax Credit (LIHTC): Key provisions from the LIHTC Improvement Act are included to support affordable housing development.
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Restoration of Business Tax Provisions: Full expensing of research and development (R&D), bonus depreciation, and fixes to interest expense deduction limits are reinstated.
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Immediate Expensing for Industrial Structures: Applies to structures used in manufacturing, refining, agriculture, and related industries, encouraging investment in these sectors.
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Opportunity Zones Renewed: The program is renewed with revised incentives to encourage targeted investment, including in rural areas.
These provisions collectively aim to bolster the real estate sector, support homeowners, and encourage investment in housing and related industries.
For a more detailed overview, you can read the full article here: First Draft of Tax Reform Bill “Very Positive” for Real Estate.
