How Much Should Congress Be Involved with Real Estate?
According to a recent article by the Washington Post, congresses in action on real estate issues have left some homeowners and real estate investors a little unsettled.
According to the house ways and means committee chairman Dave Camp, “he is not revealing the details of his long-awaited comprehensive tax reform bill this year but will also not seek passage of the so-called extenders bill for expiring tax code benefits.” But this is not surprising from our Congress since they are typically slow to get out any type of reform or extensions until the last minute. This is certainly leaving a lot of real estate investors and homebuyers on the fence about what to do.
Camp’s reform bill would attempt to lower individual and corporate income tax rate next to a maximum of 25%. It’s expected to call for significant cutbacks in prized real estate deductions for home mortgage interest as well as local property tax write-offs. Eliminating this mortgage interested action would be a huge hit for American taxpayers. So far, everyone’s wiping their brow with relief that it hasn’t passed as of yet.
The failure of tax writers to put together and extenders bill means that important Internal Revenue Code provisions affecting large number of homeowners will lapse on December 31. This would also include relief from taxation on mortgage debt forgiveness by lenders in most states as well as deductions for mortgage insurance premiums and energy-saving home improvements.
Those that invest in rental properties will also complicate matters even more. This bill would terminate one of the oldest financial planning techniques used by real estate investors; 1031 tax exchanges. This is where property owners can defer taxes indefinitely when they swap similar investment real estate properties within certain time periods. Currently, investors can do this without any type of IRS regulations or penalties. In addition to this code, the bill would also sharply increase the depreciation period for residential investment real estate. It is currently 27.5 years to 43 years. This would make investors unable to write off more on their properties later on down the line. – Sited from Washington Post
Currently everything is status quo and the Association for Homeowners is relieved for the time being. This may be one bill we are glad they are holding off on.