Æðµã´«Ã½

This post was updated on July 3.

The House today passed the One Big Beautiful Bill Act (H.R. 1) — sweeping tax and domestic policy legislation that includes several important housing and business provisions that will benefit small businesses, real estate and our members. Most notably, Æðµã´«Ã½ was able to secure key wins regarding state and local tax deductions for individuals and pass-through businesses.

The Senate narrowly passed the bill earlier this week and today’s action by the House approving the Senate version meets President Trump’s goal of sending him the landmark legislation by July 4.

Prior to the House and Senate votes, Æðµã´«Ã½ sent a letter to congressional leaders designating support of H.R. 1 as a “key vote” because of its importance to the housing industry.

Æðµã´«Ã½ secured several key victories in this landmark legislation:

Individual Provisions

• The Tax Cuts and Jobs Act’s key provisions will be made permanent, including the tax rate structure and increased exemptions for the Alternative Minimum Tax. This blocks a $4 trillion tax increase set to take effect next year.
• The estate tax exemption will increase to $15 million, made permanent and be indexed for inflation.
• Current mortgage interest deduction rules will be made permanent and mortgage insurance premiums will now be allowed to be deducted.
• The Pease limitation on itemized deductions will be permanently repealed. In its place is a new limitation that reduces the value of itemized deductions for taxpayers in the top bracket from 37 cents to 35 cents, but excludes 199A deductions for this limitation.

Business Provisions

• The Section 199A Qualified Business Income Deduction, which helps provide tax parity for pass-through entities, will be made permanent at 20%.
• The Low-Income Housing Tax Credit will be expanded permanently with a 12% increase in 9% credit allocations along with reducing the 4% bond test to 25%, which will expand resources in bond-constrained states.
• 100% bonus depreciation will be restored and made permanent.
• Section 179 business expensing limits will be increased for small businesses.
• Opportunity Zones will be made permanent.
• The 1099 reporting threshold will be increased permanently to $2,000 and indexed for inflation starting for 2025.
• The Section 460(e) Completed Contract rules will be expanded to include condominiums, in addition to single-family homes. This is a key tax accounting provision that ensures that home builders are not taxed on deposits paid by a buyer during construction of a single-family home, but rather the home is taxed when sold. This bill extends the same tax treatment to deposits paid by condominium buyers during the construction phase, which is a change Æðµã´«Ã½ advocated for.

State and Local Tax Deduction for Individuals and Pass-Through Businesses

The House-passed bill would have permanently increased the controversial limit on the state and local tax (SALT) deduction for individuals from the current $10,000 cap to $40,000. Æðµã´«Ã½ supported the House position on SALT, which was one of the final elements negotiated in the House bill that ensured its passage.

The Senate viewed the House proposal on SALT with skepticism, but also recognized the careful political balance needed to pass the bill in the House. Several senators sought to unwind the House SALT deal, which threatened the viability of the entire bill, leading to high-level negotiations between the House, Senate and Treasury Secretary Scott Bessent.

The final bill approved by the Senate ultimately agreed to follow the House and increase the SALT cap to $40,000, but only on a temporary basis. The increase will take effect for 2025 and remain in force through 2029, with a 1% inflation adjustment after 2025. As with the House-passed bill, the Senate bill phases down the cap increase for households with incomes above $500,000, but not below a $10,000 cap. The SALT cap would revert back to $10,000 in 2030, which means debate over limiting SALT deductions will continue in the coming years.

In a major victory for our members, the final bill by the Senate removed a limitation to the amount of state income taxes a pass-through business can deduct. This means that none of our members faces a business SALT tax increase.

Energy Tax Credits

The one negative in the tax title of H.R. 1 is the early termination of the energy tax credits, particularly the Section 45L New Energy Efficient Home Credit, the Section 25D Residential Clean Energy Credit, and the Section 48E Clean Electricity Investment Credit.

The Section 45L credit will be eliminated after June 30, 2026, and the Section 25D credit will expire at the end of 2025. The Section 48E credit will be eliminated for eligible property that is not placed in service by Dec. 31, 2027. However, on a positive note, the Senate heeded Æðµã´«Ã½’s recommendation to allow solar leasing arrangements to continue to benefit from the 48E tax credit. These arrangements eliminate the upfront costs of installing a solar system on a home and allow home owners to benefit from reduced utility costs. 

Æðµã´«Ã½ believes the most effective way to promote energy efficiency is through voluntary tax incentives. Moreover, Æðµã´«Ã½ remains concerned because H.R. 1 lacks sufficient transition time for home builders, home owners and remodelers who use these tax credits.  

Over their history, these energy tax credits have been subject to starts and stops as Congress has allowed them to expire. This history suggests that this is not the final word on these tax credits, and Æðµã´«Ã½ will look for future opportunities to revive them. 

Finally, the bill also includes provisions regarding two Æðµã´«Ã½ key priorities to increase domestic timber production as well as provide additional resources for workforce development.

A Long, Successful Fight

Æðµã´«Ã½ began preparing for this tax fight shortly after the Tax Cuts and Jobs Act was signed into law in 2017, recognizing that the temporary tax cuts in that 2017 law would set up a tax cliff and force Congress to re-examine the entire tax code in 2025. Faced with the potential of a $4 trillion tax increase and resulting economic turmoil, Æðµã´«Ã½ focused on the need for tax stability and permanency as well as retaining favorable tax provisions that support housing production, enable greater homeownership opportunities, and create affordable rental housing.

At the same time, the industry faced considerable risk in this process, as Congress considered limiting businesses’ ability to deduct state income taxes, eliminating carried interest, increasing marginal tax rates and eliminating the deduction for second homes. It was hard fought, but we avoided any negative changes to those provisions.

Because of our years of preparation, passage of this bill brings Æðµã´«Ã½ members a permanent tax code that retains, and in some cases expands, key tax provisions that support the industry.