The Washington Report

Following a long and difficult congressional process that started early this year, President Trump on July 4th signed into law H.R. 1, “The One Big Beautiful Bill Act” (the Act). This enormous piece of legislation includes a number of important tax provisions that will have a large impact on real estate professionals and on real property investment.

H.R. 1 Highlights:

• The 20 percent Qualified Business Income Deduction (Section 199A) is made permanent and slightly improved. This was the largest single tax reduction for most REALTORS® and other independent contractors and owners of pass-through businesses from the Tax Cuts and Jobs Act of 2017 (TCJA), but it was scheduled to expire at the end of 2025. Its extension and enhancement prevents a nasty tax hike that otherwise would have hit most real estate professionals in a few months.
• The reduced tax rates, higher standard deduction, and increased child tax credit initiated by the TCJA, which were set to expire at the end of 2025, are extended permanently and enhanced. This means that any resulting shock to the economy from the scheduled higher taxes starting in 2026 has been dodged and that more households may be able to afford to own or purchase a home than otherwise could.
• The $10,000 state and local tax (SALT) deduction limit from the TCJA is temporarily multiplied to $40,000 for tax years 2025 through 2029. However, for those with higher incomes (modified adjusted gross income - MAGI) of more than $500,000, the limit will be decreased by 30 percent of the excess of MAGI over the threshold until it reaches the minimum SALT deduction of $10,000. The SALT limit and threshold are increased by 1 percent for 2026 through 2029 but in 2030, the cap permanently reverts to $10,000. This means that for this and the next four years, many more current and prospective homeowners will be able to receive federal tax benefits for owning and purchasing a home and will have lower taxes.
• Opportunity Zones are extended permanently, including the full exclusion of capital gain on OZ investments held for 10 years, and strengthened. Beginning in 2027, the Act provides a rolling, 5-year deferral period for prior gain that is invested in an opportunity fund, which ends the prior problem of a shrinking OZ tax incentive as the statutory recognition date for deferred gain approaches. The Act also provides that the OZ census tracts are to be redesignated by state governors every 10 years and redefines low-income census tracts eligible for OZ designation as those with a median income of 70 percent of the statewide median level (down from 80 percent). Further, OZ investments will be eligible for a 10 percent basis increase after 5 years and additional tax incentives are provided for rural Opportunity Zones.
• The Estate and Gift Tax threshold is set permanently to $15 million per person, plus adjustments for future inflation. The higher threshold that was established by TCJA was set to fall to just $5 million per person (plus inflation adjustments) in 2026. This change will ensure that many family-owned real estate businesses will not be subject to confiscatory taxes when passed from one generation to another.
• The Act increases permanently the allocation of low-income housing credits to states by 12 percent and permanently lowers the requirement for private bond financing for these projects without a state credit allocation from 50 percent to 25 percent. This is projected to result in the creation of over a million additional apartments throughout the nation over the next decade.
• The Act broadens 529 Education Savings Accounts to allow them to be used for expenses related to acquiring and maintaining professional credentials such as real estate licenses and career training.

Other Real Estate-Related Changes Include:

• The Act reinstates and permanently extends immediate 100 percent expensing of equipment, machinery, leasehold improvements, and nonresidential interior improvements to real property.
• The Act ends a discriminatory tax accounting rule that created phantom income for developers of condominiums with respect to the pre-sale of units.
• The Act creates a temporary, 4-year 100 percent expensing benefit for the construction of new factories, which are defined as nonresidential real property used in the manufacturing, production, or refining of tangible personal property. Construction must begin after January 19, 2025, and be completed before the end of calendar year 2028 and the property must be owner-occupied.
• The Act increases the deductibility limit of business interest expense. This change will help many larger real estate operations who may have faced limits on depreciation or interest expense deductions in the past.

The One Big Beautiful Bill Act is also notable for what is NOT included that had been seriously considered by Congress and/or the President. NAR’s advocacy operation worked very hard and often behind the scenes to ensure that these potentially devastating backdoor tax increases did not make it into the Act. These provisions would have harmed real property investment and some real estate professionals.

Left Out of Act:

• No limitations or repeal of section 1031 like-kind exchanges. For many years, some in Congress have sought to take away some or all the benefits of this vital tax deferral tool that increases economic growth and creates jobs.  It is not touched by the Act.
• As key members of Congress sought a solution to the unfair $10,000 state and local tax (SALT) deduction limit, an idea took shape to instead limit the deduction of SALT payments by businesses and real estate investors. For many such entities and investors, property tax payments can be very significant and this idea could have been catastrophic. Once NAR lobbyists educated congressional offices on these facts, this idea was dropped.
• The mortgage interest deduction (MID) was fully and permanently preserved at levels prescribed in the 2017 TCJA. Some key members of Congress were considering weakening or even repealing the MID to help offset the cost of the other tax provisions, but this notion was not included in the Act.
• An increase in the top income tax rate for individuals to 39.6 percent. Congressional Republicans considered this idea to lower the cost of the overall bill but ended up removing it.
• Repealing the capital gains treatment on carried interests. President Trump spoke out much on his desire to change the current law to tax the income from sales of real estate “carried interests” at ordinary income rates instead of lower capital gains tax rates. In the end, the Act did not include this change.
• New taxes on tax-exempt entities, such as trade associations. Ideas for this included taxing royalty income from trademarks and logos, which would have hit NAR hard, as well as taxing now-exempt parking and transportation benefits for association employees. Both ideas were left out of the Act.
• The Act does, however, phase out certain clean energy tax incentives that have long been in the tax law. For example, the section 179D deduction for energy-efficient commercial buildings is repealed for projects that begin construction after June 30, 2026. And the section 45L credit for new energy-efficient homes expires for homes acquired after June 30, 2026.

As can be seen from the above items, the new tax Act will have some significant impacts on various real estate stakeholders.

Impact of Act on Various Real Estate Stakeholders:

• Independent Contractors (including 90+ percent of REALTORS®):
  • Permanent and improved qualified business income deduction (199A).
  • Reduced personal tax through lower rates, etc.
• Real Estate Brokers and Agents:
  • Permanent and improved qualified business income deduction (199A).
  • More prospective clients with increased ability to afford first or subsequent homes due to lower taxes and higher deductions from increased SALT cap.
  • Reduced personal tax through lower rates, etc.
  • Expansion of 529 Education Savings Accounts to cover obtaining and maintaining real estate licenses and career training.
• Existing Homeowners:
  • Higher likelihood of receiving tax benefits for owning a home, which would make homeownership more affordable.
  • Reduced personal tax through lower rates, etc.
• Prospective Homeowners:
  • Higher likelihood of receiving tax benefits for owning a home and reduced personal tax, which would make homeownership more affordable.
• Commercial Real Estate Owners, Operators, and Investors (non-corporate):
  • Permanent and improved qualified business income deduction (199A).
  • Immediate expensing.
  • Reduced personal tax through lower rates, etc.
  • No new limits on 1031 like-kind exchanges.
• Family Businesses:
  • Much lower chance of having devastating estate and gift taxes impact ability to pass business to next generation.
• People In Need of Affordable Housing:
  • As many as 1.22 million additional affordable homes over the next decade compared with what would have been built otherwise (per Novogradac).
• Taxpayers With High State and Local Taxes:
  • Significantly lower taxes due to increased deduction for SALT payments.
• Investors With Long-term Capital Gains:
  • Enhanced and permanent investment opportunities with tax deferral benefits from extension and strengthening of Opportunity Zones.
• Real Estate Developers:
  • No increase in tax rate when selling “carried interests” in real estate partnerships, which will lead to more deals getting done.
  • Change in accounting rule for condos.
• Members of Trade Associations:
  • Less chance of dues increase from increased taxes exempt organizations.
  • Expansion of 529 Education Savings Accounts to cover obtaining and maintaining real estate licenses and career training.

On July 15, 2025, the U.S. Senate unanimously passed H.R. 1815—the VA Home Loan Reform Act, by voice vote. The National Association of REALTORS® strongly supported this bipartisan legislation, which aims to make permanent the VA's temporary policy allowing veterans to directly compensate their real estate agents, ensuring they can participate in the housing market on equal footing with other homebuyers. The bill also creates a partial claims program to assist veterans who have fallen behind on their mortgage payments. The House of Representatives passed H.R. 1815 by unanimous voice vote in May, and the bill now heads to the president's desk for signature.

"The VA Home Loan Guaranty is a unique government program that allows veterans to purchase a home without a down payment," says Shannon McGahn, NAR executive vice president and chief advocacy officer. "We are grateful to the House of Representatives and the Senate for passing this measure and providing veterans and active-duty service members the same advantages as other buyers in a competitive real estate market. NAR remains committed to protecting the brave men and women who serve this country in the armed forces and ensuring they are given equal opportunities to achieve the American dream of homeownership."

In 2024, NAR successfully advocated for the Department of Veterans Affairs to temporarily suspend its policy that barred veterans from compensating professional representation in a real estate transaction, providing immediate relief for veteran homebuyers. Since then, NAR has worked closely with the VA and the House and Senate Veterans' Affairs Committees to pursue a permanent solution. This outdated rule—though temporarily suspended—has made it difficult or even impossible for veterans to retain real estate representation in transactions involving seller-paid commissions or buyer-agent compensation. H.R. 1815 is a critical step toward ensuring that veterans are never placed at a disadvantage in the homebuying process.

NAR previously sent a letter to House leadership, thanking them for holding a vote on the bill.

On July 10, 2025, the U.S. Department of Housing and Urban Development (HUD) and the Office of Management and Budget (OMB) announced the termination of some policies introduced under the Biden era's Property Appraisal and Valuation Equity (PAVE) task force, including:

• ML 2024-16, Extension to the Effective Date of Appraisal Review and Reconsideration of Value (ROV) Updates
• ML 2024-07, Appraisal Review and Reconsideration of Value
• ML 2021-27, Appraisal Fair Housing Compliance and Updated General Appraiser Requirements

While the July 10 announcement provides more language around the reasoning behind these changes, these policies were initially rescinded on March 19, 2025 in Mortgagee Letter (ML) 2025-08. Read the Washington Report on the initial announcement.

For the first two items, on Reconsiderations of Value (ROVs), FHA has reverted to published language prior to implementation of a uniform process for borrower initiated ROVs that aligns with published Fannie Mae and Freddie Mac policies. However, borrowers are still entitled to request an ROV if they have concerns about the appraisal and should contact their lender to obtain information on initiating a request.

NAR supports a consistent framework for the reconsideration of real estate valuations and believes that consumers should be able to provide additional information about a property, ask questions, or request errors be corrected in a standardized way.

The Appraisal Fair Housing Compliance ML was rescinded because the Uniform Standards of Professional Appraisal Practice (USPAP), which appraisers are required to adhere to per FHA policy, was updated in 2024, resolving the concerns the ML intended to address.

While HUD has removed the Biden-era standards, the department confirmed that existing fair housing laws remain fully in effect. The Fair Housing Act and Equal Credit Opportunity Act, which prohibits discrimination in homebuying and lending, will continue to be enforced.

On July 17, 2025, Senator Raphael Warnock (D-GA) announced the introduction of the Appraisal Modernization Act co-sponsored by Senators Angela Alsobrooks (D-MD), Lisa Blunt Rochester (D-DE), Cory Booker (D-NJ), Andy Kim (D-NJ), and Elizabeth Warren (D-MA). 

The bill institutes the creation of a public database of information that is within appraisals created for mortgage loans and standardizes processes for borrower-requested reconsiderations of value.

Although the stated purpose of the bill is to “require that financial institutions, appraisal management companies, appraisers, and other valuation professionals are serving the housing market in a manner that is efficient and consistent for all mortgage loan applicants, borrowers, and communities,” NAR has raised concerns about consumer privacy, MLS copyright infringement, and market manipulation risks with the current language of the bill.

NAR will continue to defend its member priorities.