Gauging the tax impacts of the House budget resolution

Based on laws proposed and passed on March 17, 2025

The real estate sector is keenly observing the shifting tax environment as Congress endeavors to advance a comprehensive fiscal year 2025 budget resolution that could lead to substantial tax modifications.

With the House narrowly approving a resolution that proposes $4.5 trillion in tax reductions over the next decade, real estate companies must assess the potential effects on their operations, investments, and financial strategies.

Key tax policy developments 

The House's budget resolution, passed on February 25 by a 217-215 vote, aligns with President Trump's vision for a unified reconciliation bill encompassing all tax and spending measures. Conversely, the Senate has adopted a more fragmented approach, concentrating on border security, energy, and defense, while deferring tax policy to a later stage. If House Republicans succeed in their strategy, tax legislation – including extensions of key Tax Cuts and Jobs Act (TCJA) provisions – could progress more rapidly than anticipated.

A notable provision for real estate investors and developers is Trump's initiative to restore 100% bonus depreciation, retroactive to his inauguration on Jan. 20, 2025. Initially a cornerstone of the TCJA, this provision allowed businesses to immediately deduct the full cost of qualifying property investments, offering a significant cash flow advantage. The phaseout of this deduction began in 2023, and its reinstatement could directly benefit real estate firms by enhancing liquidity and encouraging new development and property improvements.

Challenges and considerations 

Despite the House's assertive stance, the conditional $4.5 trillion tax cut figure introduces fiscal constraints that could necessitate difficult trade-offs. The Congressional Budget Office has estimated that extending TCJA cuts alone would cost approximately $5 trillion over 10 years, indicating that the allocated spending would be insufficient for a full extension. If additional measures are included, lawmakers may need to identify new revenue sources or limit the duration of extensions.

Further complicating matters is the desire of Senate Republicans and Trump to make the TCJA permanent, which creates several points of contention, including how such legislation would be scored and whether deficit hawks would support it. For real estate firms, this means that tax planning remains uncertain. A reduction in the SALT deduction cap, for example, would benefit high-income investors and property owners in high-tax states like New York. However, potential offsets, such as limiting business-related SALT deductions, repealing energy incentives, or adjusting carried interest treatment, could introduce new costs and considerations.

Staying ahead of the curve 

As the House and Senate work to reconcile their competing budget resolutions, real estate professionals should prepare for multiple potential outcomes. The House's single-bill strategy has Trump's backing, increasing pressure on the Senate to follow suit; however, at this time, the upper chamber does not appear to be capitulating, as they are not expected to take up the measure for weeks. Additionally, several significant procedural hurdles remain, and any final resolution will require approval from both chambers.

A failure to align could delay tax reform, leaving real estate investors uncertain about long-term depreciation schedules, interest deduction limits, and the future of critical tax incentives. The industry should also monitor potential revenue-raising measures that could impact real estate investment structures and profitability.

Given the stakes, real estate firms must remain proactive. Engaging in scenario planning, reassessing investment strategies, and staying informed about legislative developments are all crucial steps. Baker Tilly is closely monitoring these discussions, providing insights and guidance to help real estate professionals navigate the evolving tax landscape.

Read the full article on Crain's New York to learn more about the tax impacts to real estate firms and how Baker Tilly can be added to your plan for success.