Let me start by saying: this isn’t about politics.
This article is not here to sway you in one direction or another. My only goal is to help homeowners, buyers, and anyone in the real estate space understand what the One Big Beautiful Bill (OBBBA) — also known as the "Big Beautiful Bill" — currently moving through Congress actually says, and how it could affect you.
The legislation is massive and complex. It includes permanent extensions of the 2017 Tax Cuts and Jobs Act, revisions to the State and Local Tax (SALT) deduction cap, expansions to the child tax credit, elimination of green energy incentives, significant changes to Medicaid and SNAP funding, and more. Each of these elements impacts homeowners and the real estate market in different ways. Let's dive into the details.
SALT Deduction Cap Increase
The increase of the SALT deduction cap from $10,000 to $40,000 for five years is one of the more immediately noticeable changes. For homeowners in high-tax states and counties, this can represent significant tax relief. For example, if you pay $18,000 in combined property and state income taxes annually, you would only have been able to deduct $10,000 under previous law. Now, you can deduct the full $18,000, reducing your taxable income by an additional $8,000. Depending on your tax bracket, this can result in federal tax savings of $1,600 to $2,800 per year. However, it is worth noting that this adjustment is temporary unless renewed by future legislation.
Child Tax Credit and Trump Accounts
Another major shift is the expansion of the Child Tax Credit (CTC) to $2,500 per child, which eventually phases back to $2,000. Additionally, the bill introduces new "Trump Accounts," which function as tax-advantaged savings accounts with an annual contribution of $1,000 per child. These accounts are intended to promote long-term savings for families. The practical result is more monthly budget flexibility, which may enhance affordability for housing, childcare, and other major expenses. For a family with three children, this could mean $7,500 in annual tax credits and $3,000 in dedicated savings, directly impacting their financial capacity to buy or maintain a home.
Elimination of Green Energy Tax Credits
On the flip side, the bill also eliminates a number of green energy tax credits. This includes Section 25D for residential solar, Section 25C for energy-efficient home improvements like windows and heat pumps, and Sections 45L and 45Y/48E related to clean electricity and builder incentives. These programs have historically made sustainable upgrades more accessible and affordable. Without these credits, homeowners and developers will likely see increased out-of-pocket costs for solar installations, energy-efficient systems, and green construction. This could discourage adoption and slow the momentum toward energy-efficient housing stock, possibly affecting property values in communities where such features are currently in demand.
Projected National Debt and Mortgage Rates
A significant concern raised by analysts, including the Congressional Budget Office, is the projected impact on federal debt. Estimates suggest the bill could increase national debt by $2.4 to $4 trillion over the next decade. While not directly related to homeownership, this has long-term implications. Higher debt may prompt higher interest rates to keep U.S. bonds attractive to investors, which in turn affects mortgage rates. A single percentage point increase in mortgage interest rates on a $500,000 loan could increase monthly payments by over $300. This shift in affordability could price out potential buyers and cool the real estate market.
Cuts to Medicaid and SNAP
Further, the bill calls for substantial reductions in federal funding for Medicaid and SNAP, tightening eligibility and reducing access for millions. For the housing market, this means increased pressure on lower-income households. Those who depend on government support to afford housing may find themselves at risk of eviction or homelessness. This not only affects individual families but can also destabilize neighborhoods and put strain on local support systems.
Tax Relief for Service Industry Workers
There are also provisions aimed at increasing take-home pay for service industry and lower-income workers. The bill proposes the elimination of taxes on tipped income and overtime, alongside an expansion of the standard deduction. This could improve mortgage eligibility and help first-time buyers accumulate savings for down payments. Greater financial stability among working-class buyers might broaden the pool of homebuyers, particularly in markets like Utah where entry-level homes are in high demand.
Final Thoughts
In summary, the Big Beautiful Bill contains a complex mix of provisions that both help and challenge the real estate ecosystem. On one hand, families may benefit from tax credits, increased deductions, and higher take-home pay. On the other, the removal of energy efficiency incentives and the long-term threat of higher interest rates could offset those gains. Add in cuts to social programs, and you have a bill that reshapes the financial landscape for both current and future homeowners.
As always, the real-world impact of such a broad bill will depend on how it is implemented and how families, professionals, and markets respond. My goal with this breakdown is to equip you with the knowledge you need to make informed decisions, whether you're thinking of buying, selling, investing, or simply staying updated on what shapes our market.
Have questions about how this legislation might affect your own housing journey? I’m always available for a conversation.
