The "Stop Predatory Investing Act" disallows interest and depreciation deductions for owners of 50 or more single-family rental properties, with exceptions for sales to individuals for use as a primary residence or to qualified nonprofit organizations.
Raphael Warnock
Senator
GA
The "Stop Predatory Investing Act" amends the Internal Revenue Code to disallow both interest and depreciation deductions for taxpayers who own 50 or more single-family residential rental properties, with exceptions for sales to individuals for use as a primary residence or to qualified nonprofit organizations. This disallowance does not apply to properties sold to individuals who will use them as their primary residence, or to qualified nonprofit organizations. The bill defines single-family residential rental property and specifies the types of nonprofit organizations that qualify for the exception. It also clarifies that disallowed interest cannot be capitalized or treated as chargeable to a capital account.
Tax Breaks Targeted for Big Landlords: Bill Aims to Limit Deductions for Owners of 50+ Single-Family Homes
Congress is looking at a proposal called the "Stop Predatory Investing Act," which takes aim at large-scale landlords by changing the tax rules. Specifically, this bill would amend the Internal Revenue Code to stop taxpayers who own 50 or more single-family residential rental properties from claiming deductions for mortgage interest (under Section 2) and property depreciation (under Section 3) on those homes. The rules would kick in for debt taken on, or properties put into service, in taxable years after the bill becomes law.
The 50-Property Question: Who's Affected?
The core change targets what the bill calls "disqualified single-family property owners." To fall into this category, you need to own 50 or more "single-family residential rental properties." What counts? Any rental property with four or fewer units, including houses, duplexes, triplexes, and fourplexes. However, there are carve-outs: properties using low-income housing tax credits (Section 42) are exempt, as are newly constructed or acquired properties (though the bill doesn't specify for how long). For affected owners, losing the ability to deduct mortgage interest and depreciation could significantly alter the financial equation of holding large portfolios of these smaller rental properties, effectively increasing their taxable income.
An Off-Ramp for Selling?
Interestingly, the bill includes specific exceptions tied to selling the properties. The denial of interest and depreciation deductions doesn't apply in the taxable year a property is sold, provided it's sold to either an individual who will use it as their main home, or to a qualified nonprofit organization. These nonprofits include groups focused on community development, affordable housing, land banks, and community land trusts – entities often working to maintain long-term housing affordability. This structure seems designed to encourage large portfolio owners to sell properties, particularly to owner-occupants or organizations focused on affordability, rather than holding them indefinitely or selling to other large investors.
The Bigger Picture: Reshaping the Rental Market?
By removing key tax advantages for large-scale owners of single-family rentals, the bill appears aimed at leveling the playing field for individual homebuyers who often compete with cash-flush investors. It could also potentially steer more properties towards owner-occupancy or dedicated affordable housing programs via the sales exceptions. However, the real-world impact hinges on how investors respond. Will they divest properties as intended, potentially increasing supply for buyers? Or could it lead to consolidation into different ownership structures to avoid the 50-property threshold? There's also the question of whether reducing investor demand could impact the overall supply or quality of single-family rentals available to tenants.