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The White House’s recently released fiscal year 2026 budget proposal is notable for what it doesn’t do: For the first time in years, there’s no mention of repealing or limiting Sec. 1031 like-kind exchange provision.
While primarily a statement of the president’s policy priorities, the proposed budget is still viewed as an indicator of where federal dollars—and debates—may go next.
The 1031 like-kind exchange is a vital tax-deferral tool for real estate investors, allowing sellers to defer capital gains taxes when they reinvest proceeds into similar property. While this practice has long been a cornerstone of real estate investment strategy, it has also routinely been eyed by lawmakers as a potential source of revenue to fund unrelated spending.
The National Association of REALTORS® and other advocates have long argued that 1031 exchanges are not tax breaks for the wealthy but rather an engine for investment and a benefit to the community. This year’s budget proposal signals a new willingness to let the provision stand as evidence continues to highlight its economic benefit.
Where Cuts, Shifts Are Proposed
Apart from its hands-off approach on 1031s, the budget outlines changes to housing policy, particularly within the Department of Housing and Urban Development (HUD).
Proposed cuts span multiple HUD programs, and the budget introduces a structural overhaul of federal rental assistance. Under the new proposal, existing rental aid initiatives would be consolidated into a single grant program with funds going directly to states for all rental assistance.
A Blueprint for Congress to Consider
It’s important to remember that presidential budgets are not binding, says NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn. The president’s proposal serves as a blueprint and guidepost, not a bill. Congress, specifically the House and Senate Appropriations committees, will now deliberate on the recommendations and draft their versions of the budget—decisions that will ultimately shape federal spending for the coming year. The federal fiscal year runs Oct. 1 through Sept. 30.
“The president’s budget is mainly a messaging document, and it faces significant hurdles as written,” McGahn says. “It never makes it into law in the same form. This is the same with every president. We will continue to work with the administration and to monitor and educate.”
As the FY 2026 budget continues to take shape, NAR and other industry stakeholders are keeping a close eye on developments, advocating for the continuation of key programs that support homeownership, rental stability, and the professionals who power the real estate economy.
