tax credit powerpoint presention
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TRANSCRIPT
The 2008 Housing and Economic Recovery Act
Background
Became law July 30, 2008
Product of months of intense advocacy by NAHB and membership
Bipartisan effort of lawmakers
“The most important housing legislation in a generation.” Sen. Dodd, D-Conn.
What it will do
Help home buyers and home owners
Promote affordable housing
Fight falling housing prices
Help home owners facing foreclosure
Improve mortgage liquidity and provide lifeline to Fannie Mae and Freddie Mac
Legislation overview
$7,500 first-time home buyer tax credit
FHA modernization
GSE reform
Mortgage revenue bond program
Low-Income Housing Tax Credit
Home buyer tax credit
Temporary $7,500 credit for first-time home buyers (Credit = 10% of the purchase price of a home, up to $7,500)
Homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible
Goal: bring first-time home buyers back into the housing market
Home buyer tax credit
First-time buyer defined as: individual or married couple who has not owned a principal residence for 3 yrs.
Vacation home/rental property ownership doesn’t disqualify
Both spouses must be first-time home buyers
House boats, mobile homes, duplexes qualify
Home buyer tax credit
Credit claimed on buyer’s tax return
2009 buyers can claim on 2008 return
Taxpayers anticipating credit and certain of eligibility can reduce income tax withholding
Can be claimed by those who pay no taxes
Tax credit income limits
Full credit amount is available for single filers with up to $75,000 of modified adjusted gross income
Married filers: $150,000 limit
Partial credit available to $95,000 for single, $170,000 for married
Tax credit recapture
Credit works like zero-interest loan
Repaid on tax form at 6.67% of credit amount per year over 15 years
$7,500 credit = approx. $500 repaid per tax year
Recapture begins with tax return 2 years after credit is claimed
Tax credit acceleration
If home is sold before 15 years, unpaid recapture amount is accelerated
BUT -- only if there is sufficient capital gain from the sale
If insufficient gain, remaining recapture amount is forgiven
Thus, IRS assumes “price risk” for the home
Tax credit expected impact
Will spur large number of purchases due to profile of average first-time buyer:
Constitute about 40% of all home buyers in the market each year
Median cost of home purchased = $150,000
Average income tax liability is just $5,000
Tax credit expected impact
Influx of new first time buyers will enable existing owners to sell and purchase larger or newer home
“Ladder” effect will increase sales, prices will stabilize as supply and demand comes back into balance
FHA modernization & expansion
Increases FHA loan limit up to $625,500
Raises floor for area FHA mortgage limits to $271,500
Simplifies FHA rules for condominium sales
Additional authority for FHA to insure mortgages of home owners facing foreclosure
Increases FHA down payment requirement from 3 to 3.5%
Ends seller-assisted down payment programs as of October 1, 2008
FHA modernization & expansion
GSE reforms
New regulator for Fannie, Freddie, Federal Home Loan Banks
GSE-backed loan limits increased to $625,500
Explicit financial guarantee to GSEs
Treasury Dept. authorized to take debt or equity stakes as necessary
Other tax incentives
$11 billion in new mortgage revenue bond authority
$4 billion in Low-Income Housing Tax Credit reforms
Additional standard deduction amount for home owners who do not itemize
Negative change to capital gain exclusion rules for second homes
Impact of other provisions
GSEs will continue role in the housing finance system and help keep mortgage interest rates low
Mortgage revenue bond authority can be used to refinance troubled mortgages or finance affordable multifamily rental housing
Additional standard deduction for non-itemizers compensates for rising property tax bills
Consumer Web site
www.federalhousingtaxcredit.com NAHB launched site to educate consumers
Includes: Tax credit overview
FAQs
Links to resources
175,000+ unique visits so far
Tax credit promotion NAHB has materials to help you promote
the credit at: www.nahb.org/mythbuster
Customizable materials include:
Print ads
Web site ads
Fact sheet
Talking points
Consumer flyer
Op-ed
Radio scripts
Newsletter article
Print ads
Web site banner ads
Key consumer messages
Unprecedented “window of opportunity”
Don’t wait to take advantage of:
Temporary tax credit
Great selection of homes available
Today’s competitive prices
Affordable financing options
Don’t try to time the market
One final note…
It is important to encourage first-time buyers to consult with a tax practitioner to:
Confirm eligibility and address unique situations
Determine ways to maximize the impact and timing of the credit
NAHB assistance
For help leveraging the resources available from NAHB;
to suggest new resources;
or to share stories about how you’ve successfully promoted the credit:
contact NAHB Public Affairs at [email protected]
or 800-368-5242, ext. 8447