A Better Look at Tax Subsidies For Housing- By: Roby Hicks
The real estate industry is definitely down. Although some signs of progress are evident in some areas, it cannot be denied that majority of the country has not recovered yet. The number of homes foreclosing remains to be rising. The values of the property continue to fall. And more and more homeowners are becoming upside down in their mortgage.
The government has subsidized most of the losses of the housing industry. In fact, they have been subsidizing a great fraction of the housing investments for several years. Such is evident in various programs that help homebuyers own a home.
Housing programs subsidized by the government
Examples of the programs by the government are the FHA loan and the VA loan. The FHA loan is a loan insured by the government to allow people having low-level incomes to own a home. Those who qualify for this type of loan will not be able to afford the down payment and would not qualify for a regular mortgage loan on their own. With the aid of the government agency, people with low income will now have the chance to purchase a house. In most cases, the down payment required by the lender will be waived and the interest rates offered are lower. In case the borrower defaults, the lender will turn to the agency insuring the loan to recover the unpaid mortgage.
The VA loan on the other hand is specifically developed to give veterans and other qualified personnel a cheaper way to own a home. This type of loan is insured by the US Veterans Administration. All you need is to provide the necessary documents that will prove that you qualify for the said programs. Just like the FHA loan, the lender will go after the insuring government agency in case the borrower through this program defaults.
Tax benefits of owning a home
Aside from the different programs by the government to help people own a home, there is also tax benefits. This is to encourage more buyers to own a home. These provisions have actually lured more to buying a property. some of the tax provisions favoring the housing industry is the deductibility of mortgage interests paid by the homebuyers, as long as they are itemized. They can deduct as $1 million for mortgage loans and as much as $100 thousand for the home equity loans.
Real estate taxes are also deductible along with the points paid during the closing for the first time homebuyers. However, certain conditions have to be satisfied first. In certain cases, there is capital gain tax exclusion when you sell your property. These are just few of the tax provisions that he homebuyers can take advantage of.
Although subsidies for housing has helped several realize their dreams of owning a home, this has alienate other forms of investment that could potentially help the country’s economy recover. Many feel that by subsidizing a huge percentage of the real estate losses and spending, the government is actually inviting more problems for the future. This is why tax subsidies and tax provisions should be carefully reviewed.
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