9 Major Real Estate Tax Changes Effective 2026

May 10, 2026 - 01:29

Homeowners and real estate investors should prepare for a series of significant tax adjustments arriving in 2026. These changes, stemming from the expiration of provisions in the Tax Cuts and Jobs Act, will alter how property is bought, sold, and held. Here is a breakdown of the nine major shifts to watch for.

First, the standard deduction is set to drop back to pre-2018 levels after adjusting for inflation. This means fewer people will itemize, making mortgage interest deductions less valuable for many. Second, the cap on state and local tax deductions, known as SALT, will revert to a lower limit, hitting homeowners in high-tax states hard. Third, the mortgage interest deduction limit for new loans will fall from $750,000 back to $1 million, benefiting buyers of more expensive homes.

Fourth, the deduction for home equity loan interest will be restricted again. Fifth, the exclusion on capital gains from home sales will tighten, requiring stricter ownership and use tests. Sixth, the 1031 like-kind exchange rules for real estate will face new limitations, affecting investors swapping properties. Seventh, depreciation schedules for residential rental property will lengthen, reducing annual write-offs. Eighth, the qualified business income deduction for real estate professionals will expire. Finally, the estate tax exemption will be cut roughly in half, exposing more inherited property to federal taxes.

These changes underscore the need for proactive planning. Consulting a tax professional now can help you adjust strategies before the new rules take effect.