ShareOn Friday, May 2, the White House released its FY 2026 budget proposal, which suggests to Congress the preferred funding levels for a wide range of discretionary agency spending. Importantly, this is the first presidentially-proposed budget in four years that has not recommended limiting or repealing the 1031 like-kind exchange, an important tax tool for real estate. The 1031 like-kind exchange allows a property seller to defer paying capital gains tax if they use the proceeds of the sale to purchase another “like kind” property, which creates liquidity in the market and encourages property owners who no longer need or want a property to sell it to someone who does and find something more suitable for themselves. The provision is not well-understood outside of real estate and has frequently been seen as a potential “pay-for” for other federal spending priorities; however, the data shows that 1031s ultimately result in more taxes being collected, due to typical investments made into both of the impacted properties—a sale that may not have happened at all without it.
The proposed budget also proposes cuts to the Department of Housing and Urban Development’s (HUD) budget across a range of programs, and makes structural changes to federal rental assistance by combining many existing programs into a single grant and allowing states to determine how best to utilize the funding.
The president’s proposed budget is not policy; it is sent to the appropriators in Congress as a messaging document sharing the White House’s spending priorities. The Appropriations Committees will consider its proposals but ultimately will develop their own budget to reflect their own priorities and those of their constituents. NAR is monitoring the budget-making process and actively advocating for the wide range of federal grants and programs used to support homebuyers, a healthy rental housing market, and REALTORS® around the country.
