The U.S. Congress passed President Trump’s “One Big Beautiful Bill Act” on July 3rd, which is a comprehensive bill containing various tax laws and expenditures that will have a significant impact on Americans. Many of the tax laws included in the act will directly or indirectly affect the real estate market, aiming to help Americans afford expensive properties more easily. Whether it’s renting, buying, selling, or constructing properties, everyone needs to understand the details of this tax reform. So, let’s delve into this new tax reform from the perspective of real estate.
The “One Big Beautiful Bill Act,” also known as the “大而美法案” in Chinese, has been translated in various ways, such as “Beautiful Big Act,” “One Big Beautiful Bill Act,” or “Beautiful Big Act.” Within the media group of Da Ji Yuan, it is commonly referred to as the “One Big Beautiful Bill Act.” Therefore, we will use the term “One Big Beautiful Bill Act” to explain it further.
It should be noted that the following report is based on extensive research, but I am not a professional tax expert or a certified accountant, so the information provided here is for reference purposes only and should not be considered as tax advice.
Firstly, let’s take a look at the deduction of state and local taxes, known as SALT deduction. This tax deduction was detailed in an article on May 25th and went through several rounds of debate in both the House of Representatives and the Senate. Fortunately, the deduction limit was increased from $10,000 to $40,000, providing relief to residents in high-tax states. However, this deduction is time-limited, applicable from 2025 to 2029, with the limit adjusting for inflation until 2030 when it reverts back to $10,000.
To benefit from the SALT deduction, taxpayers can only choose itemized deductions and cannot use the standard deduction simultaneously with the SALT deduction. There are income limits for individuals to qualify for the full $40,000 deduction, with adjustments for single filers, married couples, head of household filers, and those with dependents. Those exceeding the income limits will be limited to a maximum deduction of $10,000.
This tax law is designed to ease the tax burden on middle-class American families, particularly those residing in high-tax and high-income areas. In regions with lower property taxes and incomes below the threshold, using the standard deduction may be more advantageous.
Secondly, the deduction for mortgage interests and insurance has been reinstated and permanently extended. Under the new tax reform, annual interests on mortgages up to $750,000 can be fully deducted and permanently extended. Mortgage insurance deductions, which expired in 2021, have been reinstated and also permanently extended. Loans signed before December 15, 2017, can still benefit from a $1 million interest deduction limit, under the old scheme.
For the new mortgage interest deduction part, interests on loans up to $750,000 for joint filers can be fully deducted, while single filers with loans up to $375,000 can receive complete deductions. This deduction applies to primary and secondary residences but excludes investment properties like rental homes.
Moreover, mortgage interests can be deductible on home equity loans used for property construction or significant renovations as long as the property serves as collateral. However, interest on loans used for tuition fees or debt consolidation is not eligible for deduction. The deduction for mortgage interests cannot be used independently by those opting for the standard deduction.
For instance, if a homebuyer purchases a house for $800,000 in 2025 with a $700,000 loan at a fixed 6% interest rate, the full $42,000 interest for the first year can be deducted as it falls within the $750,000 borrowing limit. The overall tax savings depend on the individual’s tax bracket, for a 24% tax rate, the savings could amount to $10,080.
Even high-net-worth individuals can benefit from the mortgage interest deduction as it applies to all income groups. Therefore, even the wealthiest like Elon Musk can claim this deduction for their property purchases. If Musk buys a $2 million property with an 80% loan of $1.6 million, he can only deduct interest on $750,000, with the rest subject to tax.
Additionally, mortgage insurance deductions that protect lenders if down payments are less than 20% are applicable to various types of mortgages, including low-income, military, and agricultural loans. However, these deductions only apply to primary residences and cannot be claimed on investment property mortgage insurance.
Furthermore, there are income restrictions for mortgage insurance deductions. Single filers with adjusted gross incomes (AGI) below $100,000 can claim full deductions, with a gradual reduction for incomes between $100,000 and $109,000, and no deduction for incomes over $109,000. For married couples filing jointly, the limits are $200,000 for full deductions and $218,000 for partial deductions, with no deductions for incomes exceeding $218,000. As mortgage insurance premiums are generally not high, falling within the range of $500 to $3,000, those who meet the income criteria can avail of these deductions.
Thirdly, the expansion of the Low-Income Housing Tax Credit (LIHTC) aims to support affordable housing initiatives by providing tax credits to developers for constructing or renovating residential units for low-income households. The LIHTC program, in place since 1986, has been significantly expanded in the “One Big Beautiful Bill Act.” Each state will receive increased per capita allocations, with additional allocations for “deeply low-income households,” “elderly residences,” and “homeless shelters” until 2035. This program covers new construction, redevelopments, and refurbishments, with the Trump administration estimating the creation of or retention of one million affordable rental units.
The impact of LIHTC primarily benefits developers, making it easier for individuals to access economically feasible housing and counteracting rising rental pressures. Therefore, the focus will not be further elaborated here.
These three points directly relate to real estate in the tax reform bill. However, several other tax amendments are equally vital and deserve attention:
One significant change is the increase in standard deduction amounts. Whether it’s SALT deduction, mortgage interest deduction, or mortgage insurance deduction, all fall under itemized deductions and cannot be used concurrently with standard deductions. If the amount that can be deducted through standard deductions is higher, taxpayers need not separately utilize itemized deductions.
Regarding the increase in itemized deductions, even individuals who use standard deductions need not worry about missing out on tax relief as the standard deduction has also been raised!
For the 2025 tax year, the standard deduction amounts have been enhanced: $15,750 for single taxpayers, $31,500 for married couples filing jointly, and $23,625 for heads of households. These amounts will be adjusted for inflation with additional increments until 2028. For example, by 2026, the standard deduction is predicted to rise to $16,300 for singles and $32,600 for couples, as per the Congressional Budget Office’s forecasts.
Moreover, individuals aged 65 and above can claim an additional deduction besides the standard deduction. Single filers can claim an extra $6,000, while married couples both over 65 can claim $12,000. It is important to note that these additional deductions cannot be used alongside itemized deductions and are subject to gradual reduction for AGIs over $75,000 for singles and $150,000 for married couples.
The additional deductions for seniors will automatically adjust annually based on the inflation index and have been made permanent in the new law, eliminating the need for yearly congressional renewals. This provision serves as a significant benefit for the retiree population, helping them combat inflation and medical expenses while enhancing their financial security.
For instance, if a couple aged 70 and 66 respectively uses the standard deduction, they can claim $31,500 and an additional $12,000, totaling $43,500 in deductions.
The “One Big Beautiful Bill Act” also increases the estate tax and gift tax exemption amounts to $15 million each, totaling $30 million for married couples. The Generation-Skipping Transfer Tax (GST Tax) also enjoys a separate $15 million exemption, adding up to $30 million for couples, linked to inflation. Effective from 2025, these exemptions have been made permanent, marking one of the most critical tax reforms for high-net-worth households.
For instance, Mr. A gifts $8 million to his children in 2025, exceeding the annual tax-free gifting limit of $18,000. The remaining $8 million counts towards the total taxable gift and estate tax exemption. Therefore, Mr. A has around $7 million of the total exemption left for future use. In case of Mr. A’s passing with an estate worth $6 million, below the remaining exemption of $7 million, he would not owe any gift or estate taxes. However, if Mr. A’s estate is $8 million or above, exceeding the exemption by $1 million, that $1 million would be subject to a 40% estate tax.
Furthermore, the GST Tax applies to transfers or trusts across multiple generations like from grandparents to grandchildren, with an independent lifetime exemption of $15 million. The tax-free amounts for these three components benefit many high-net-worth Asian families with substantial estates.
Another significant change is the early termination of federal tax credits for electric vehicles on September 30, 2025. Those interested in purchasing electric vehicles should expedite their purchases to avail of potential tax rebates. New cars can receive a maximum rebate of $7,500, while used cars qualify for a $4,000 rebate. Therefore, a surge in purchases is anticipated before the credits expire.
The tax credits for installing electric vehicle charging stations remain in effect until June 30, 2026, with tightened restrictions. Individuals can claim a maximum 30% deduction on installation costs, up to $1,000, only for qualified chargers set up in low-income or non-urban areas.
For example, if Mr. B installs a charging station at his suburban home for $2,800, a 30% deduction amounting to $840 falls within the $1,000 limit, reducing his taxable amount directly.
These are some of the tax provisions directly or indirectly related to real estate in the “One Big Beautiful Bill Act.” It is reiterated that this discussion is for informational purposes only, and for actual tax planning and compliance, individuals are advised to consult certified accountants or financial experts for accurate tax services.