How the Big Beautiful Bill Is Shaking Up San Diego Real Estate: What Buyers and Sellers Need to Know

New tax breaks, commission rules, and housing policies are transforming the San Diego housing market. Here’s your guide to staying ahead in 2025 and beyond.

It’s official: The Big Beautiful Bill, signed into law on July 4th, 2025, is now in motion, ushering in some of the biggest changes the real estate world has seen in years. Whether you’re buying, selling, or investing in the San Diego real estate market, here’s how this sweeping legislation could impact you:

✅ Bigger Tax Breaks for San Diego Homeowners and Buyers

The cap on SALT deductions has been raised from $10,000 to $40,000 for many taxpayers. SALT stands for “State and Local Taxes,” and includes costs like property taxes and state income taxes. This deduction helps homeowners in high-tax states save money by reducing how much of their income is subject to federal taxes. For homeowners in places like San Diego County, this could make a big difference in affordability and cash flow.

Mortgage insurance and mortgage interest deductions are now permanent, making homeownership more affordable for many buyers in the San Diego housing market, especially those using lower down payments.

✅ Potential Changes to Capital Gains Exclusion

Lawmakers are actively considering raising the capital gains tax exclusion on the sale of a primary residence. Currently, homeowners can exclude up to $250,000 of profit if single, or $500,000 if married and filing jointly, from capital gains taxes when they sell their primary home, as long as they meet certain ownership and use requirements.

💼 What Was On the Table for Review

• Higher Exclusion Limits: Proposals included raising the exclusion to $500,000 for individuals and $1 million for married couples filing jointly. This change aims to reflect today’s much higher home prices, especially in markets like La Jolla, Del Mar, Carlsbad, and other San Diego neighborhoods.
• Income-Based Phaseouts: Lawmakers debated phasing out the higher exclusion for taxpayers above certain income levels (e.g., incomes over $500,000 or $1 million). The goal is to ensure the benefit helps middle-class homeowners rather than ultra-high-net-worth sellers in high-value markets like San Diego County.
• Indexing for Inflation: Another option was to tie the exclusion amounts to inflation so they’d automatically adjust each year, avoiding future “bracket creep” as home prices continue to rise in areas like Encinitas, Solana Beach, and Rancho Santa Fe.
• Ownership and Use Rules: Some versions proposed changing the two-out-of-five-years rule — possibly extending it to three or five years to discourage rapid flipping by investors while still helping long-term homeowners in markets like San Diego.

🕒 Why It’s Not Defined Yet

Despite strong interest, these changes didn’t all make it into the final text of the Big Beautiful Bill. Instead:

• The House passed versions with higher exclusions, but the Senate deferred the final numbers.
• Lawmakers are still negotiating details like the new dollar limits, income thresholds, and how these changes would integrate with other housing incentives.
• The Treasury Department and IRS need time—often several months—to issue official guidance clarifying who qualifies and how the rules would work.
• Budget constraints and political debates over potential revenue loss are slowing the process.

Bottom line: The capital gains exclusion hasn’t officially changed yet—but significant increases remain firmly on the legislative radar. Sellers in San Diego’s high-value neighborhoods considering listing in the next year or two should keep an eye out for updates, since a higher exclusion could allow homeowners to keep far more profit tax-free.

✅ Boost for Affordable Housing in San Diego

The Big Beautiful Bill significantly expands the Low-Income Housing Tax Credit, aiming to build or preserve over a million affordable rental homes nationwide, including in markets with rising housing costs like San Diego County. This is intended to ease housing shortages and bring more balance to the housing market in areas like Chula Vista, Oceanside, and Escondido.

✅ Major Shifts in Real Estate Commissions

Following major antitrust lawsuits, the Big Beautiful Bill codifies new practices: sellers are no longer required to offer compensation to a buyer’s agent in MLS listings. Instead, buyer-agent commissions will be individually negotiated, and buyers must sign agreements with their agents before touring homes in the San Diego housing market. This brings more transparency—but also new costs buyers should budget for.

✅ MLS Listing Transparency in San Diego

“Pocket listings” and off-market deals face stricter rules. Properties marketed publicly—like on social media—must be listed in the MLS quickly, giving buyers broader access and preventing secret deals that keep listings out of public view in markets like San Diego.

💡 The Bottom Line for San Diego Real Estate

The Big Beautiful Bill is transforming the real estate landscape in San Diego and across Southern California:

• ✅ Buyers could see bigger tax breaks and more transparency in the home search process.
• ✅ Sellers might need to rethink pricing and commission strategies.
• ✅ Investors and developers will have new opportunities—and rules—to navigate, especially in high-demand areas like San Diego County.

Planning to buy or sell in San Diego this year? Let’s talk about how these new laws could shape your best move—and make sure you’re ready to navigate the changing market in neighborhoods like La Jolla, Encinitas, Carmel Valley, and beyond.