First Draft of Tax Bill is ‘Very Positive’ for Real Estate

WASHINGTON—The National Association of Realtors reported that Republicans on the House Ways and Means Committee released the full draft text of their portion of tax reform legislation on May 12—delivering significant wins for the real estate sector and reinforcing provisions long championed by NAR.

NAR’s advocacy team successfully secured its top five tax priorities in the draft bill, including an enhanced small business tax deduction, a strengthened state and local tax (SALT) deduction, and protections for the mortgage interest deduction (MID). The bill also makes the current lower individual tax rates permanent and increases the child tax credit, moves that could help increase homeownership access for more American families.

"This is a very strong opening bid for our advocacy priorities. This draft language preserves or strengthens a raft of provisions vital to housing affordability, including making the current lower income tax brackets permanent,” says NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn. “These are all measures we have worked tirelessly to advocate for on behalf of our members.”

“The bill also triples current SALT deduction limits, although it is very possible the SALT deduction could become even more favorable during the amendment process. A national poll commissioned by NAR in April showed that 61% of voters support increasing or eliminating SALT caps, and 74% say double taxation fairness is a compelling reason to do so,” McGahn continued.

A partial draft of the legislation was released Friday night. The latest details come 24 hours before the committee is scheduled to begin the formal mark-up process today.

"While the early details are overwhelmingly positive for the real estate economy and small businesses, I would caution that this is just the first draft. The bill will continue to evolve as it moves through the committee process and eventual passage in the House and Senate, with many amendment votes to come,” McGahn said. “We will continue to engage directly with congressional leadership, key committees, and other policymakers to ensure that housing affordability and support for small businesses remain top priorities in these negotiations.:

He continued, “At a time when we face a historic shortage in housing supply, it is essential that this legislation does not worsen the affordability crisis. With real estate accounting for nearly one-fifth of the U.S. economy, a strong real estate sector is vital to the health of the broader economy.”

Below is a summary of the draft provisions released today:

Top Five NAR Tax Priorities

1. Qualified Business Income Deduction (Section 199A)

The draft bill retains, makes permanent, and increases the QBI deduction from 20% to 23%.
This deduction benefits more than 90% of NAR members, who are classified as independent contractors or small business owners.
83% of voters support the 20% tax deduction for independent contractors and small businesses making less than $400,000 a year, according to NAR’s recent national poll.

2. State and Local Tax Deduction (SALT)

The SALT deduction cap is tripled from $10,000 to $30,000 for households earning under $400,000. However, the bill does not eliminate the current-law marriage penalty. Thus, single filers and married couples filing a joint return both can deduct a maximum of $30,000 in state and local taxes.

3. Individual Tax Rates

The current lower individual tax rates are made permanent and indexed for inflation, aiding taxpayers and improving affordability for prospective homebuyers.
86% of voters support the lowered income tax rates for individuals and married couples, according to NAR’s recent national poll.

4. Mortgage Interest Deduction (MID)

The draft preserves and makes permanent the MID at its current level, maintaining a key tax benefit for homeowners and supporting housing market stability.
There had been concern MID might be reduced or eliminated as a budget offset.
91% of voters support maintaining tax incentives such as the mortgage interest deduction for homeowners, according to NAR’s recent national poll.

5. Business SALT and 1031 Like-Kind Exchanges

The draft bill protects Section 1031 like-kind exchanges, which are often erroneously regarded as a tax loophole.
It also includes no changes for most businesses deducting state and local taxes (sometimes referred to as “Business SALT").
While the bill does provide limits in state-level business SALT workarounds for certain high-income professionals (e.g., law firms, hedge funds, consulting businesses, and other services), the provisions do not appear to impact real estate professionals.

Additional Positive Tax Provisions for Real Estate Economy

• Child Tax Credit Increased to $2,500 (2025–2028)

Temporarily raises the child tax credit through 2028 and then indexes it for inflation starting in 2029. The child tax credit supports families and could help with housing affordability.

• Permanent Estate and Gift Tax Threshold Set at $15 Million (Inflation-Adjusted)

Prevents a significant drop in exemption levels and supports generational wealth transfer, aligning with NAR priorities.

• No Top Tax-Rate Increase

The proposed 39.6% top rate was removed from the bill.

• Low-Income Housing Tax Credit (LIHTC)

Key provisions from the LIHTC Improvement Act will be included to support affordable housing development.

• Restoration of ‘Big 3’ Business Tax Provisions

Full expensing of research and development (R&D).

Bonus depreciation.

Fixes to interest expense deduction limits.

• Immediate Expensing for Certain Industrial Structures

Applies to structures used in manufacturing, refining, agriculture and related industries.

• No Change to Carried Interest Treatment

• Opportunity Zones

Renewed with revised incentives to encourage targeted investment, including in rural areas.

80% of voters expressed support for tax incentives for investors to encourage economic growth and development in underserved and poorer communities, according to NAR’s recent national poll.