House Approves Tax Bill with Key Housing and Business Provisions

By a vote of 215-214, the House early in the morning on May 22 narrowly passed the One Big Beautiful Bill Act, sweeping tax and domestic policy legislation that NAHB believes is very positive for small businesses, real estate and our members. As the measure made its way through the House, NAHB sent a letter of support to House leaders while also urging Congress to make targeted improvements to the bill.

In the past months, NAHB has raised concerns on the potential elimination of businesses’ ability to deduct property taxes, changes to the mortgage interest deduction, and the elimination of energy tax credits. And throughout this process, we have also supported the effort to increase the $10,000 cap on state and local taxes (SALT) for individuals, which is a priority for our members in high-cost states.

NAHB secured several key victories in the House tax bill:

• Business SALT was not included, meaning that businesses can deduct property taxes paid to state or local governments in full.
• The individual SALT limit would increase from $10,000 up to $40,000, for taxpayers earning less than $500,000. The original bill increased the limit to $30,000, and NAHB successfully urged lawmakers to raise this threshold.
• The Low-Income Housing Tax Credit would be expanded.
• The Tax Cuts and Jobs Act would be made permanent, including the tax rate structure and increased exemptions for the Alternative Minimum Tax.
• The Section 199A Qualified Business Income Deduction, which helps provide tax parity for pass-through entities, would be enhanced by increasing the deduction from 20% to 23%.
• The estate tax exemption would increase to $15 million.
• 100% bonus depreciation would be restored.
• Opportunity Zones would be extended.

The bill also replaces a long-standing limitation on itemized deductions known as the Pease limitation with a new mechanism, which slightly reduces the value of itemized deductions for high-income earners. 

Energy Tax Credits Face Early Termination

The bill proposes to end several energy tax credits used in the housing industry:

1. Section 45L New Energy Efficient Home Tax Credit would be eliminated after Dec. 31, 2025 (currently runs through 2032). This is a $2,500 tax credit for energy efficient new homes obtaining Energy Star certification, with a higher tier for net-zero ready homes. This provision includes a special rule allowing homes that have commenced construction before May 12, 2025, to qualify for the credit if they are acquired by Dec. 31, 2026.
   
   
2. Section 25D Residential Clean Energy Credit would be eliminated after Dec. 31, 2025 (currently runs through 2032). Under current law, taxpayers may claim a credit for residential expenditures for solar electric property, solar water heating property, fuel cell property, small wind energy property, geothermal heat pump property, and battery storage property. The value of the credit is 30% of the expenditures.
   
   
3. Section 48E Clean Electricity Tax Credit, a 30% tax credit for installing clean power technology such as solar, and previously known as the Investment Tax Credit. 48E would be eliminated for projects that begin construction more than 60 days after this bill is signed into law. Furthermore, any remaining eligible projects must be placed in service by Dec. 31, 2028. The bill also prohibits companies that lease eligible 48E technology from claiming the credit, which is directed to solar companies that offer free solar systems to home owners. 

In the earliest stages of drafting this tax bill, Republicans targeted a series of energy tax credits — including key credits used by our industry — because of their connection to one of the Biden administration’s top legislative accomplishments, the Inflation Reduction Act. Republicans attacked these credits both from a political angle but also to help pay for this tax package. In a flurry of final changes to the bill released late night on the eve of passage, House leadership made additional changes to meet the demands of hardliners who wanted these credits to phase out on an accelerated timeline. 

NAHB does not support the early termination of these tax credits. NAHB believes the most effective way to promote energy efficiency is through voluntary tax incentives. We also recognize that builders, remodelers, and home owners made strategic decisions based on these tax credits, and at a minimum, Congress must provide a sufficient transition period. 

As this bill moves to the Senate, NAHB will continue to advocate for these tax credits. We also acknowledge that it may be difficult to alter the House bill in the Senate as there is a small, but focused, group of House Republicans fighting to eliminate these tax credits. Any changes to the bill made in the Senate must then pass the House, which gives the House ongoing leverage. 

Other Key Provisions in the Tax Bill

Finally, in addition to the huge tax package, the legislation also includes other provisions of interest to the housing community:

• Regulatory Reform. The legislation contains strong regulatory reform provisions, including the requirement for federal agencies to consider both direct and indirect costs associated with any new regulation, as well as requiring congressional approval for major rules. NAHB has been a strong proponent for this regulatory reform measure.


• Workforce Development. The bill provides for a new Workforce Pell grant program that will help prepare students for high-paying, sustainable jobs in the country’s most in-demand industries, including the residential construction sector.


• Timber Production. The United States does not produce sufficient lumber to meet the housing industry’s demand, requiring costly imports. The bill would boost domestic production of timber from both United States Forest Service and Bureau of Land Management lands. NAHB believes increasing domestic lumber production from federal lands represents a win-win for housing affordability and the resilience of our national forests.