The Real Estate Tax Credit

Will it jumpstart the housing market? When do I buy?

The Real Estate Tax Credit purpose is to jumpstart the housing market. When it was realized that by 11/30/09, when the tax credit was supposed to expire, that the progress was not enough, it was decided to extend to 04/30/10 and adding exiting homeowner qualifications to expand to those that can benefit from the program.

The tax credit awards First TIme homebuyers (those individuals who have not claimed interest on any property or owned a home for the past three years) with $8,000.00 or 10 % of sales price, whichever is lower. Existing homeowners can get a credit of 6500.00 if they show that they owned and lived in a home for 5 out of the last 8 years. New purchases must be under contract by 04/30/10 and close by 6/30/10. Question is that will the Credit jumpstart the housing market. Despite heavy criticism, the numbers do not lie. Despite a slow 4th quarter , 2009 saw a 15% increase in sales and applications for the month of January 2010 exploded.

Many consurmers are hesitant to buy with decreasing values and speculation on the mortgage process. The benefits of being a homeowner need to be addressed outside of the immediate "tax credit carrot" that the government is dangling in front of potential buyers. The market and industry must not depend on this credit if they want the recovery to come full circle. On top of the tax credit new homeowners have an advantage come tax time. Not only do they get the credit but the "writeoffs" are great. Property Taxes, Interest Paid, Origination Fees, home repair charges, home improvement charges, green friendly upgrades. Im not a tax expert but the amount of money gone into a home can benefit you way more come tax time then a renter.

Think about this scenario, 5k for property taxes, 8 k of mortgage interest paid, 3k for mortgage origination, 2k for new bathroom, 5k for eco windows, 2k for green appliances. Thats 25k in writeoffs that renters would not benefit from. Oh yeah I almost forgot I walked with 8k for just buying. Thats a 33k swing on income. Even if the house that I buy for 150k drops by 10% in the next year, thats only 15k compared to the 33k beneifit I got for buying this year. That does not count the tax benefits of writing off property taxes and interest paid every year after year one.

I am not a tax expert and please consult a tax advisor for the best advice.

~Mini Rizz