What the 2025 Federal Tax Reform Means for Homeowners (aka The Big Beautiful Bill’s Impact on Real Estate)

July 14, 2025
devinlucas

The 2025 tax reform delivers long-awaited wins for homeowners and investors including expansion of the SALT caps — but leaves some of the biggest questions, like outdated capital gains exclusions, still unanswered.

Connect With Us

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act into law — ushering in one of the most sweeping federal tax reforms in recent history. The bill delivers significant wins for real estate, homeowners, business owners, and investors, particularly in high-tax states like California with increases in the SALT deduction cap and other favorable aspects.

Here in Newport Beach, Eastside Costa Mesa, Laguna Beach and our surrounding Orange County communities, the impacts of this legislation are especially relevant for property owners, investors, trustees, and business owners looking to optimize their tax strategies.

Real Estate & Homeowner Tax Highlights

SALT Deduction Cap Increased (Temporarily):
The State and Local Tax (SALT) deduction cap rises from $10,000 to $40,000 per household for tax years 2025 through 2029.
- Full benefit for incomes up to $500,000; phased out for higher earners.
- A major win for California homeowners and investors impacted by high property taxes and state income tax rates.
Mortgage Interest Deduction Cap Made Permanent:
The $750,000 cap on deductible mortgage debt is now permanent, providing certainty for buyers of higher-end homes in markets like Newport Beach and Costa Mesa.
Mortgage Insurance Premium Deduction Reinstated — Permanently:
Deductibility for PMI, FHA mortgage insurance, VA funding fees, and USDA guarantee fees is back — permanently.
- Phases out for incomes over $100,000 ($50,000 for married filing separately).
1031 Exchanges & QBI Deduction Protected:
The bill preserves the powerful 1031 like-kind exchange rules for real estate investors, alongside making the 20% Qualified Business Income (QBI) deduction permanent for pass-through entities.
Low-Income Housing Tax Credit (LIHTC) Ceiling Increased:
Aimed at spurring affordable housing development — something in critical shortage across California.
Opportunity Zones & Section 1202 Enhancements:
Extensions and enhancements reward investment in qualified areas and certain private business ventures.

Broader Business & Investment Provisions That Affect Real Estate Owners

100% Bonus Depreciation Restored:
Real estate professionals and investors can immediately expense qualifying assets placed in service after January 19, 2025, driving increased capital investment.
Immediate Expensing of U.S.-Based R&D:
Applicable for property development firms with research or innovation components, allowing deductions to be taken upfront.
Section 179 Expensing Limits Increased:
The cap rises to $2.5 million, with a higher phase-out threshold — beneficial for property owners with equipment-heavy operations.
Termination of Clean Energy Credits:
Developers and real estate investors relying on 179D, 45L, and other clean energy credits will need to adjust financial models, especially for projects after June 30, 2026.
Section 899 Retaliatory Tax Eliminated:
Encourages continued foreign investment in U.S. real estate — a notable factor in coastal California’s high-end markets.
SALT Work-Arounds Preserved:
Pass-through entity SALT deduction strategies remain intact, particularly beneficial for real estate partnerships and LLCs.

No Change (Yet) to Section 121 — The Longstanding Home Sale Exclusion

Despite the sweeping tax changes, one key homeowner tax provision remains unchanged:

IRS Section 121 Capital Gains Exclusion:
Homeowners can still exclude up to $250,000 (single) or $500,000 (married filing jointly) of gain on the sale of their primary residence — provided they meet the two-year ownership and use test. These limits, unchanged since 1997, have failed to keep pace with today’s home prices — especially in markets like Newport Beach and Costa Mesa, where appreciation often exceeds the exclusion thresholds.There are efforts to change this:
- Representative Marjorie Taylor Greene introduced the “No Tax on Home Sales Act,” a proposal to eliminate capital gains tax on the sale of a primary residence entirely.
- The bill aims to encourage mobility, unlock equity for longtime homeowners, and relieve what some see as an “unfair burden” on middle-class families.

While the bill has yet to advance in Congress, it reflects growing recognition of how outdated the Section 121 exclusion has become — a critical issue for California homeowners dealing with significant property appreciation.

What This Means for You — Newport Beach, Costa Mesa, & Orange County Owners

Whether you’re a homeowner, real estate investor, trustee, or business owner, this bill delivers both immediate and long-term planning opportunities:

Higher SALT deductions (but only until 2029)
Permanently locked-in mortgage interest and mortgage insurance deductions
Investor-friendly provisions protecting 1031 exchanges, depreciation strategies, and entity structures
Adjustments needed for clean energy investments or green building projects

At Lucas Real Estate Group, we not only help clients buy, sell, and manage properties — we also help navigate the legal and tax complexities that impact every transaction. With property taxes, investment strategies, and tax laws evolving, having the right team behind you is more important than ever.

Questions or Need Help?

We’d love the opportunity to assist with your next sale, purchase, investment, or strategic planning. Whether you need real estate brokerage, legal advice, or property management, we’re here for you.

(949) 478-1623 | info@lucas-real-estate.com

— Devin Lucas, Real Estate Broker, REALTOR®, Attorney
Lucas Real Estate Group

Sources:

Lucas Real Estate is a full-service brokerage offering residential real estate, legal services, and strategic tax planning—all under one roof.

Email: info@lucas-real-estate.com
Phone: (949) 478-1623
Sign up for our Newsletter

— Devin Lucas
Real Estate Broker, REALTOR®, and Real Estate Attorney

Lucas Real Estate Group, in partnership with Coldwell Banker Newport Beach and the Coldwell Banker Global Luxury program, offers unmatched expertise in California real estate sales, property management, and real estate tax planning strategies, including Propositions 13, 58, 193, 60, 90, and new Proposition 19.

Want to discuss real estate laws, tax planning, tax considerations, private sales, intra family sales, or real estate legal matters? We conduct paid one-hour confidential consultations via Zoom, walking families through Prop 19 impacts, potential tax exposure, capital gains considerations, and the pros and cons of gifting, sales, LLCs, or hybrid solutions. For discussions requiring real estate legal advice, private family sales, family transfers, or tax-related matters, please schedule a paid one-hour consultation via Zoom, phone, or in person using this calendar (Book a consultation here.) Upon booking, you’ll receive instant confirmation and a Zoom link if applicable.

Thinking of selling California real estate or seeking a new property management company? We would love the opportunity to assist – we provide full service sales and property management in Newport Beach, Costa Mesa and surrounding areas. If you are seeking to sell or professionally manage your home in Newport Beach, Costa Mesa or the surrounding areas, call or email anytime for a free brief consultation – info@lucas-real-estate.com or 949-478-1623.

Connect With Us

Check out our countless 5-star reviews and follow us on social media:

—-Disclaimer —-

The content on this blog is for informational purposes only. Nothing on this blog should be construed to be legal advice, and you should not act or refrain from acting on the basis of any content on this blog without seeking appropriate legal advice regarding your particular situation, from an attorney licensed to practice law in your state. The content on this blog is not guaranteed to be correct, complete, or up to date. Devin R. Lucas’ office is in Newport Beach, California and is only licensed to practice law in California. Please be advised that Devin R. Lucas only provides legal services or advice pursuant to a written legal services agreement. The content on this blog is not intended to, and does not, create an attorney-client relationship between you and Devin R. Lucas, nor does our receipt of an email or other communication from you. Some jurisdictions may consider this site to constitute attorney advertising; accordingly, please be advised this is an advertisement.

IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that, to the extent this communication (or any attachment) addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein (or in any such attachment).