Real Esate Blog

I promised more details as they became available on the new Housing Bill passed by congress and signed by the president. Well, the details are starting to come into view...and they are not as pretty as first thought.

First, the $7500 tax credit for new homeowners turns out to be an "interest free loan" to paid back in 15 years (begining the 2nd year after purchase) or when the home is sold, whichever occurs first, and the IRS is the one who will see that you do just that. You MUST file a tax return to claim the credit and it will added to your refund or applied to the tax you owe. Then each year you will have to file a tax return and have the payments added to your tax debt. Failure to do so will result in IRS penalities and interest. WOW! Not really a "gift" from the goverment at all. The total credit will be 10% of the purchase price of the property so most will qualify for the full $7500.

Next, owners of vacation homes or investment properties will no longer be able to avoid all taxes on capital gains. Simply moving to the investment property for a period of time will no longer assure you of the $250,000 ($500,000 for couples) tax free deductions you have enjoyed for a number of years now. It seems they will prorate this deduction based on the time you actually occupied the property since 1997. All appreciation for the time you did not occupy the property will taxed as income, not capital gains.

As usual with the goverment, the devil is, indeed, in the details. More on this bill as become known.