The real estate tax bill signed into law in mid-2025 is one of the most significant property-related reforms in recent years. From adjustments to state and local tax (SALT) deductions to expanded estate tax exemptions and new rules for depreciation, the bill impacts homeowners, investors, and local governments across the United States.
For millions of Americans, the changes will influence annual tax bills, long-term financial planning, and even real estate investment strategies. Below is a detailed breakdown of what this new legislation means, how it affects different groups, and what steps property owners should take to adapt.
Why the Real Estate Tax Bill Matters
Property ownership is one of the largest investments most Americans make. Taxes tied to real estate—property taxes, mortgage interest, deductions, and estate levies—directly shape affordability and long-term wealth.
The new law matters because it:
- Revises the SALT deduction, which had been capped since 2017.
- Adjusts the mortgage interest deduction, important for homeowners and buyers.
- Restores bonus depreciation for commercial property, encouraging new development.
- Expands the estate tax exemption, a huge benefit for families with property-heavy estates.
- Adds support for affordable housing and Opportunity Zones, aimed at spurring community investment.
For U.S. taxpayers, these changes mean new opportunities for savings—but also new complexities when filing taxes.
Key Provisions of the Real Estate Tax Bill
The law is broad, but here are the most important sections for property owners and investors:
| Provision | Change | Who Benefits |
|---|---|---|
| SALT Deduction | Cap raised from $10,000 to $40,000 for most taxpayers; phases out for very high incomes. | Homeowners in states with high property and local taxes. |
| Mortgage Interest Deduction | Deduction preserved for mortgage balances up to $750,000. | Buyers and homeowners with mortgages below this threshold. |
| Bonus Depreciation | 100% bonus depreciation restored for qualifying commercial property. | Real estate investors and developers. |
| Estate Tax Exemption | Increased to $15 million per person ($30 million for couples) starting 2026. | Families with significant real estate wealth. |
| Affordable Housing Credits | Expanded low-income housing tax credits to incentivize development. | Developers and communities. |
| Opportunity Zones | Strengthened incentives for investment in designated distressed areas. | Investors and local economies. |
How Homeowners Are Affected
For homeowners, the real estate tax bill brings both relief and complexity.
SALT Deduction Relief
The SALT deduction cap increase from $10,000 to $40,000 is one of the most notable changes. This helps homeowners in high-tax states like New Jersey, New York, and California, where property and local taxes can far exceed the previous cap.
Example: A homeowner paying $25,000 in property taxes and $12,000 in state income taxes can now deduct $37,000, compared to just $10,000 under the old rules. That’s a significant reduction in taxable income.
Mortgage Interest Deduction Stability
The mortgage interest deduction remains capped at $750,000 in mortgage debt. While that limit still impacts buyers in expensive markets, its preservation is a win for middle-income homeowners who rely on it to make their housing costs more manageable.
Energy Efficiency Phase-outs
One area where homeowners lose is energy credits. Some tax breaks for solar panels, high-efficiency HVAC systems, and other green improvements are being scaled back. Homeowners considering upgrades should check which credits remain available.
Commercial Real Estate and Investor Benefits
The real estate tax bill delivers strong benefits for investors and developers.
Restored Bonus Depreciation
The return of 100% bonus depreciation means commercial property owners can deduct the full cost of qualifying property immediately rather than spreading it out over years. This accelerates write-offs, improves cash flow, and encourages investment in new projects.
Opportunity Zones Expansion
The bill strengthens incentives for Opportunity Zone investments, making it more attractive to put money into distressed neighborhoods. Investors gain tax benefits, and communities benefit from new development.
Affordable Housing Incentives
Developers also gain from expanded credits for affordable housing projects. With rents rising nationwide, the goal is to stimulate construction of units accessible to low-income households.
Local Government Impacts
While the federal real estate tax bill brings relief to many taxpayers, local governments face new challenges.
- Property Values and Revenue: With office vacancies still high in many cities, commercial property values are dropping. That means lower tax revenue for municipalities.
- Residential Burden: To compensate, some local governments may increase assessments or raise residential rates, shifting the burden to homeowners.
- Luxury Surtaxes: Cities are experimenting with new taxes on luxury or second homes valued above a certain threshold. These “mansion taxes” are becoming more common as governments seek fresh revenue streams.
For residents, this means that even though federal deductions are more generous, local tax bills may continue to rise.
Estate Tax Exemption and Wealth Transfer
One of the most dramatic shifts in the real estate tax bill is the increase in the estate tax exemption.
- Starting in 2026, individuals can pass on $15 million tax-free, while couples can transfer $30 million.
- Families with property-heavy estates—farms, apartment buildings, or large homes—stand to benefit significantly.
- For many, this change eliminates estate tax liability entirely, allowing assets to transfer to heirs with minimal federal tax.
Estate planners are encouraging families to review wills and trusts now to take advantage of these new thresholds.
Case Studies: How the Law Plays Out
Example 1: High-Tax State Homeowner
A family in New Jersey pays $22,000 in property taxes and $15,000 in state income taxes.
- Before Bill: Only $10,000 deductible.
- After Bill: $37,000 deductible, lowering federal taxable income by $27,000.
Example 2: Commercial Investor
A developer buys a $5 million commercial building.
- Before Bill: Depreciation spread over decades.
- After Bill: Full deduction in year one using bonus depreciation, saving millions in upfront taxes.
Example 3: Estate Planning Family
A couple with $25 million in real estate assets wants to leave property to their children.
- Before Bill: Estate tax owed on about $12 million after exemptions.
- After Bill: Entire $25 million exempt under the $30 million couple limit.
Planning Strategies for Property Owners
To adapt to the real estate tax bill, homeowners and investors should consider the following:
- Review Itemizing: With higher SALT caps, itemizing may now yield more savings than the standard deduction.
- Check Assessments: Local property assessments can rise; appeal if values are overstated.
- Update Estate Plans: Families with property worth millions should update estate documents to maximize new exemptions.
- Consider Timing Investments: Investors may want to accelerate purchases to take advantage of bonus depreciation.
- Watch Local Laws: Track new luxury or second-home surtaxes in your area.
Criticism and Debate
The bill has sparked debate across the country.
- Supporters argue it provides relief to middle-class homeowners, encourages investment, and modernizes estate planning rules.
- Critics claim it favors wealthy individuals, especially those with expensive homes or large real estate portfolios.
- Environmental groups warn that scaling back green energy incentives slows progress toward sustainability goals.
Like most tax reforms, the law reflects a balance of competing interests—and its real-world effects will unfold over the next several years.
Looking Ahead
The real estate tax bill will continue to evolve. Guidance from the IRS will clarify implementation, states may adjust their own tax codes, and cities will respond with local measures to balance budgets.
For property owners, staying informed and proactive is key. Monitoring tax changes, consulting professionals, and planning ahead can turn these new rules into opportunities rather than surprises.
FAQ Section
Q1: How does the new real estate tax bill affect the SALT deduction?
The deduction cap has been raised from $10,000 to $40,000 for most taxpayers, giving significant relief to those in high-tax states.
Q2: What is the new estate tax exemption?
Starting in 2026, individuals can pass $15 million, and couples $30 million, tax-free to heirs. This benefits families with property-heavy estates.
Q3: What does bonus depreciation mean for investors?
It allows commercial property owners to deduct the full cost of qualifying assets in the first year, rather than depreciating them over decades.
Disclaimer – This article is for informational purposes only. It does not provide tax or legal advice. For personalized guidance, consult a qualified professional.