How the One Big Beautiful Bill Act Impacts Homeowners, Buyers, and Investors in California

The One Big Beautiful Bill Act is a new federal law that combines major tax reforms with direct housing incentives.
Its purpose is to make homeownership more affordable, encourage more housing construction, and support builders, investors, and working families.
The law restores several tax deductions, expands affordable housing credits, and raises the State and Local Tax deduction limit.

How does the new law change tax deductions for homeowners

• The law permanently restores the mortgage interest deduction for loans up to $750K.

• Homeowners who itemize can continue to deduct interest on their mortgages up to that amount.

• For buyers using smaller down payments, mortgage insurance premiums such as PMI or MIP are now permanently tax-deductible, subject to income limits.

• Married couples earning under one hundred thousand dollars and single filers earning under fifty thousand dollars can claim this benefit.

• This means buyers who cannot put twenty percent down can now get some tax relief through deductible mortgage insurance.

• It makes entering the housing market more affordable in expensive regions like Los Angeles, Santa Monica, and Malibu.

What are the SALT cap benefits under the new law

• The SALT deduction refers to State and Local Taxes that homeowners can deduct from their federal taxable income.
  It covers property taxes and state income taxes paid during the year.

• Under the previous tax law, the deduction was limited to ten thousand dollars, which hurt many California homeowners with high property and state taxes.

• The One Big Beautiful Bill Act increases the SALT deduction cap to forty thousand dollars for tax years 2025 through 2029.

• This higher cap allows homeowners to deduct a much larger share of their property and income taxes.
  However, the benefit begins to phase out for incomes above five hundred thousand dollars.
  Unless Congress takes further action, the cap will return to lower levels after 2029.

• For a typical Los Angeles homeowner who pays twenty five thousand dollars a year in combined property and state taxes, the change could reduce taxable income by fifteen thousand dollars compared to the old law.
  That could save several thousand dollars in federal taxes each year.

• The biggest beneficiaries are middle and upper-middle-income homeowners who itemize deductions.
  This increase can make homeownership more financially manageable and offset the high property tax costs common in Los Angeles County.

How does the bill expand affordable housing

The law permanently increases the Low-Income Housing Tax Credit allocation to states by 12%. This helps fund an estimated one point two million additional affordable rental homes over the next decade. It also reduces the bond financing requirement known as the fifty percent test to twenty five percent, making it easier for developers to finance projects with tax-exempt bonds.These changes allow more affordable housing developments to move forward in markets where financing used to be too difficult.

For renters and low-income families, this could mean more available housing options.

For developers and multifamily investors, the change opens opportunities to participate in more financially viable projects.

What incentives are available for builders and investors

The One Big Beautiful Bill Act makes permanent several tax deductions and credits that affect builders and investors.
It maintains interest deductibility for investment property loans, keeps the twenty percent deduction for qualified rental income, and preserves the rules for one hundred thirty one exchanges and capital gains rollovers. Opportunity Zone incentives are also extended, promoting more private investment in underserved communities.

For builders and developers, these permanent provisions reduce uncertainty and support long-term project planning.
For investors, they help maintain profitability and encourage reinvestment into new housing stock. These factors may strengthen investor demand for multifamily and income properties throughout the Westside and Los Angeles.

What support does the bill provide for first-time buyers

The One Big Beautiful Bill Act does not create a new dedicated federal down-payment grant or first-time homebuyer tax credit, contrary to what some may expect. Instead, it offers indirect support via broader tax deductions:

• It permanently allows deduction of mortgage insurance premiums (PMI/MIP) for buyers with smaller down payments.

• It fixes the mortgage interest deduction cap at $750,000 for acquisition debt.

• It temporarily increases the federal state and local tax (SALT) deduction cap to $40,000, which indirectly benefits homebuyers in high-tax states like California by reducing overall tax burden.

• It notes that for first-time buyers seeking specific federal down-payment or purchase-assistance programs, they will still need to rely on state, local or employer-assisted programs because the federal law does not provide those.

For California residents the SALT increase does apply: the higher $40,000 cap covers tax years beginning in 2025 and is available in high-tax states including California.

What are the potential drawbacks or limitations

While the new law improves affordability for many homeowners, some analysts warn that reductions to federal safety-net programs may offset gains for the lowest-income families. Cuts to programs like Medicaid or SNAP could reduce assistance for those with the highest need. The SALT deduction benefit is also temporary and income-limited, so higher-earning households may see the advantage phase out. In addition, only taxpayers who itemize deductions will benefit from mortgage interest, mortgage insurance, or SALT deductions.

Why this matters for Los Angeles and Westside homeowners

Los Angeles homeowners face some of the highest property and state taxes in the nation. The higher SALT deduction cap and renewed mortgage insurance deductions bring meaningful savings for many households, making homeownership in areas like Santa Monica, Pacific Palisades, and Culver City more attainable. At the same time, builders, developers, and investors benefit from permanent federal housing incentives and credits that promote new construction and investment. Together, these changes create a more stable and predictable tax landscape for California homeowners and real estate professionals, encouraging both homeownership and continued development across high-value markets on the Westside.

New Medi-Cal home equity limits for seniors

A significant change for California residents is the introduction of a one million dollar home equity cap for Medi-Cal long-term care eligibility beginning in 2028. Previously, California allowed homeowners to qualify for Medi-Cal regardless of home value, but the new federal rule overrides that exemption. This means seniors who own high-value homes in Los Angeles may no longer qualify for Medi-Cal assistance unless they meet specific exceptions or plan ahead. Elder-law and estate-planning professionals recommend reviewing eligibility early to protect assets and care options.

Estate planning and wealth transfer

The federal estate tax exemption is permanently increased to fifteen million dollars per individual.
This change provides major relief for families in areas where property values have risen sharply.
Homeowners can now pass high-value Los Angeles real estate to heirs without triggering substantial federal estate taxes.
For multigenerational property owners in neighborhoods such as Malibu, Venice, and Westwood, this allows smoother wealth transfer and family legacy planning.

What this means for Westside homeowners

Overall, the One Big Beautiful Bill Act strengthens long-term financial stability for Los Angeles homeowners by securing key deductions and estate protections.
It supports affordability for buyers with large mortgages, safeguards property transfers, and gives clarity for future planning. However, the new Medi-Cal home equity limit could create challenges for seniors relying on long-term care coverage. Homeowners are encouraged to review their financial and estate plans to make sure they align with the new federal and state rules.

Conclusion

Real estate laws and tax policies are constantly evolving, and even well-informed homeowners can find it challenging to keep up. Having an experienced Los Angeles real estate expert on your side makes all the difference when navigating new rules, disclosures, and financial implications. Whether you are buying, selling, or planning your next investment, professional guidance ensures you understand every step and make confident, well-timed decisions in an ever-changing market.