The reconciliation package contains a number of tax provisions; however, here are the provisions that address the real estate industry.
The bill renews an increase in 9% LIHTC allocations to 12.5% from 2025 to 2029, restoring and extending the temporary increase in credit allocations to 12.5% that had expired at the end of 2021.
According to an analysis by the firm Novogradac, the changes and additional provisions to LIHTC provided within the OBBB could finance an additional 527,000 additional affordable rental homes across the US over the period of 2026 to 2035. This would amount to the largest expansion of the LIHTC in over 25 years. In their state-level breakdown, Novogradac anticipates that the top 5 states to realize additional affordable home development over the next 10 years will be California, Georgia, Texas, New York, and Florida.
The SALT (State and Local Tax) deduction cap is set to expire at the end of 2025. The bill will raise the SALT deduction cap to $40,000 from $10,000 for incomes up to $500,000 through 2029, and will annually adjust the cap for inflation. It also revived a tax loophole allowing pass-through entities to pay state and local taxes and deduct them so individuals can avoid SALT caps.
The bill preserves Section 1031 like-kind exchanges so real estate investors can continue to defer capital gains taxes when exchanging investment properties for similar ones.
Opportunity zones are renewed with revised incentives to promote targeted investment, including in rural areas.
The bill terminates clean energy production tax credit and clean energy manufacturing credit for wind and solar projects after 2027, and it levies a penalty against new wind and solar projects that come online after 2027 unless they can completely disentangle their supply chains from prohibited foreign entities like China.
It also ends the electric vehicle tax credits after September, and the residential solar tax credit after this year.