As a real estate professional, I always keep a close eye on policy changes that could impact my clients, and the latest draft of the federal tax reform bill is worth paying attention to.
Released this week by the House Ways and Means Committee, the proposed legislation includes several provisions that could significantly benefit both homebuyers and sellers. Backed by the National Association of REALTORS® (NAR), the bill reinforces many long-standing housing-related tax incentives—several of which were at risk of being reduced or removed.
Here’s what this could mean for you:
For Buyers: Greater Affordability, More Incentives
1. Mortgage Interest Deduction (MID) is Here to Stay
The draft bill preserves and makes permanent the MID, a crucial tax break that lowers the cost of homeownership by allowing you to deduct interest paid on your mortgage. This makes buying a home more financially accessible—especially for first-time buyers.
2. SALT Deduction Cap Increased
For those living in high-tax states like California, this is big news. The cap on State and Local Tax (SALT) deductions would rise from $10,000 to $30,000 for households earning under $400,000. This means greater tax relief and potentially more room in your budget to buy the home you want.
3. Lower Income Tax Rates Made Permanent
Keeping tax rates low and tying them to inflation helps maintain your purchasing power. This could make qualifying for a mortgage easier and more manageable over time.
4. Enhanced Child Tax Credit
The child tax credit would increase to $2,500 and be indexed for inflation. For families, this could mean more money in your pocket—freeing up resources for housing expenses, renovations, or down payments.
For Sellers: Better Market Stability and Wealth Protection
1. 1031 Like-Kind Exchanges Remain Untouched
This is great news for investors and those selling income-producing properties. The tax-deferral benefits of 1031 exchanges remain intact, allowing you to reinvest proceeds without a big tax hit.
2. Estate Tax Threshold Set at $15M
This provision helps preserve family wealth through real estate and makes it easier to transfer properties across generations without facing hefty tax burdens.
3. A Boost to Buyer Demand
With increased affordability and more favorable tax conditions for buyers, sellers could benefit from greater interest and potentially faster, stronger offers in the marketplace.
Why It Matters
Housing affordability is a national issue, especially in cities like Los Angeles where high prices and limited inventory create barriers for many would-be buyers. This draft tax bill signals that housing is a top priority in Washington, and that’s good news for anyone looking to enter—or stay active in—the market.
However, it's important to remember that this is only a draft. The bill still has to go through committee reviews, amendments, and congressional votes before it becomes law. But as it stands now, the proposed reforms offer a promising outlook for the real estate economy.
Final Thoughts
Whether you’re buying your first home, selling an investment property, or just exploring your options, policy changes like this one can shape your strategy and timing. I’m always here to help you navigate these changes and make confident decisions for your future.
Have questions about how this could affect you? Let’s connect. I’m just a call or text away.
Written by Aayeesha Essue
Realtor® | The Agency Beverly Hills
Passionate about architecture, community, and creating clarity in the real estate journey.
