The "Access to Credit for our Rural Economy Act of 2025" exempts interest earned on qualified rural real estate loans by qualified lenders from federal income tax, aiming to reduce interest rates and boost rural economies, while excluding foreign adversary entities from benefiting.
Randy Feenstra
Representative
IA-4
The "Access to Credit for our Rural Economy Act of 2025" (ACRE Act) aims to bolster rural economies by excluding interest earned on qualified real estate loans by qualified lenders from gross income. These loans must be secured by rural or agricultural real estate, forestland, or related leaseholds, and cannot be made to foreign adversary entities. For single-family residences, the loan must be used for purchase or improvement, with a principal not exceeding $750,000. The Treasury Secretary is required to report to Congress on the impact of this act.
New Bill Offers Lenders Tax Break on Rural Loans Up to $750K
The Access to Credit for our Rural Economy Act, or ACRE Act, proposes a significant change aimed at boosting lending in rural areas. Essentially, it offers a tax break to banks, savings associations, insurance companies, and Farm Credit lenders: they wouldn't have to pay federal income tax on the interest they earn from certain loans secured by rural or agricultural real estate. The goal is straightforward – make lending in these areas more attractive for financial institutions.
What Kind of Loans Count?
This isn't for every loan under the sun. The tax break applies to 'qualified real estate loans' used for agricultural land, forestland, fishing operations, aquaculture, or single-family homes in designated rural areas. There's a key detail for homebuyers: if the loan is for purchasing or improving a primary residence, the loan principal can't top $750,000. The bill also specifically excludes loans made to entities tied to foreign adversaries like China, Russia, Iran, and others.
Will This Mean Cheaper Loans for You?
That's the million-dollar question, or maybe the $750,000 question for homebuyers. The idea is that if lending becomes more profitable for banks due to the tax break, they'll be more willing to lend in rural areas, and competition could drive down interest rates for borrowers. Think farmers needing capital to expand, or families looking to buy a home outside the city limits. However, there's no guarantee lenders will pass the full savings on. The bill acknowledges this uncertainty by requiring the Treasury Department to report back to Congress within five years on whether the tax break actually led to lower interest rates.
Potential Wrinkles and Who Benefits Most
While stimulating rural economies sounds good, a few things stand out. First, the $750,000 cap on home loans might cover a modest rural home in some places, but could fall short in higher-cost rural areas near popular destinations or cities. Second, the definition of 'rural' isn't specified in this section, which could create gray areas. There's also the question of who benefits most – will this primarily help larger agricultural operations and wealthier individuals secure financing, or will it truly trickle down to smaller farms and average rural families? Finally, like any tax break, the cost has to be absorbed somewhere, potentially impacting overall government revenue or shifting the tax burden elsewhere. It's a move designed to spur investment, but its real-world impact on everyday people and small businesses in rural communities remains to be seen.