Energy & Tax Extenders Act of 2008

HR Bill 6049 could be another great incentive to get into investing in real estate! While “the bill” as proposed, takes a multi-pronged approach to help stimulate a variety of industry sectors, today I want to address how the bill particularly could impact both the residential and commercial real estate markets. 

One of the most exciting line items in the bill allows for investors to get a bit of instant gratification for improvements made to their properties being leased. Traditionally, capital improvements have had to be straight-line depreciated over a 15 year period. In the proposed bill, a investor can take an investment property write off (or expense) this improvement in the year the improvements occurred thus greatly reducing the tax liability. It would be like giving a nice bonus to those investors who have been willing to re-invest in their businesses. 

The other intriguing piece of the bill I want to mention is where there is mention of a $7k-7500 tax-credit being suggested to entice buyers of residential properties. The House’s bill provides a $7500 tax-credit for first time home buyers who purchase any home during a specified period. On the Senate floor there is a similar version of this concept as well. In that bill, home-buyers would receive a $7000 tax-credit if they purchased a bank-owned or foreclosed property. 

While these two bills are targeting different important segments of the market, they both leave out a sector hard-hit by the housing market- the middle income bracket buyers and sellers. The Senate’s bill addresses the glut of foreclosures and panders to the bank’s lobby while the House’s bill creates unfairness to its biggest tax base; middle Americans. 

I propose that any tax-credit given should be across-the-board because buyers still have uncertainties about purchasing homes that are not the “starter” variety. After all, the higher the priced home, the higher the risk to them of a decline in value in terms of dollars.