Earlier this year, Congress passed a $4.5 trillion budget bill—nicknamed the “One Big Beautiful Bill Act”—which includes updates that directly impact state and local tax (SALT) deductions, mortgage rules, and housing investment incentives.
Read on for a closer look at what the new bill means for homeowners, buyers, and sellers.
SALT Deductions: A Bigger Break Ahead
If you own a home in Illinois or any other state with high property taxes, you probably felt the squeeze from the 2017 cap on state and local tax (SALT) deductions, which limited what you could write off to $10,000. Starting in 2025, that cap rises to $40,000—and will increase slightly each year through 2029 before returning to $10,000.
What it means for you: Whether you’re already a homeowner or planning to buy in a high-tax market, this adjustment could reduce your taxable income. For sellers, it may also enhance the attractiveness of homes in communities where high property taxes have been a sticking point.
Mortgage Deductions and PMI Relief: Locked In
Two key tax rules are now permanent. First, the bill permanently extends the deduction on mortgage interest up to $750,000 of acquisition debt, which was previously established in the Tax Cuts and Jobs Act. Second, you can also deduct premiums for mortgage insurance (PMI, FHA, VA, or USDA), as long as your income falls within the limits.
What it means for you: These deductions can save you thousands over time, especially if you made a smaller down payment or live in a market with higher home values. It’s one more reason to feel confident about purchasing or refinancing in today’s market.
For Developers and Commercial Owners
The Opportunity Zone program—designed to drive investment into underserved areas—just got a major upgrade. Not only is it now permanent, but it also includes stricter guidelines to ensure funds flow to truly distressed communities. Investors can defer capital gains for five years or until they sell the investment, whichever comes first. There’s a notable bonus too: investments in rural zones receive a 30% discount on capital gains after five years, while metro-area investments earn a 10% discount.
Low-Income Housing Tax Credits (LIHTCs) have also been expanded. Since 1986, LIHTCs have helped finance over 3.5 million affordable rental homes across the U.S. The bill expands this program by permanently increasing the 9% credit allocation by 12.5% and lowering the bond financing requirement for 4% credits from 50% to 25%.
