Kevin Sears President | Official website
Republicans on the House Ways and Means Committee have released a draft of their tax reform legislation, offering several benefits to the real estate sector. The National Association of Realtors (NAR) has expressed satisfaction with the inclusion of its top five tax priorities in the bill. These priorities include 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 proposes making current lower individual tax rates permanent and increasing the child tax credit.
Shannon McGahn, NAR Executive Vice President and Chief Advocacy Officer, commented on the draft: "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."
The bill suggests tripling current SALT deduction limits. McGahn noted that public support exists for this change: "A national poll commissioned by NAR in April showed that 61% of voters support increasing or eliminating SALT caps."
While expressing optimism about the initial details, McGahn cautioned 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."
The proposed legislation includes several other provisions aimed at supporting housing affordability and economic growth. It retains and increases the Qualified Business Income Deduction from 20% to 23%, benefiting many NAR members classified as independent contractors or small business owners. The SALT deduction cap is proposed to be increased from $10,000 to $30,000 for households earning under $400,000.
Individual tax rates are set to remain permanently lowered and indexed for inflation. The MID will be preserved at its current level. Section 1031 like-kind exchanges are protected in this draft.
Additional positive changes include an increase in the child tax credit through 2028, a permanent estate and gift tax threshold set at $15 million adjusted for inflation, no increase in top tax rates, improvements to Low-Income Housing Tax Credit provisions, restoration of key business tax provisions such as full expensing of research and development costs, bonus depreciation, fixes to interest expense deduction limits, immediate expensing for certain industrial structures, no change to carried interest treatment, and renewed Opportunity Zones with revised incentives.
NAR's policy team continues reviewing the bill as it progresses through legislative processes.