What Washington’s New Stimulus Package Can Do for You
Everywhere you turn there is talk of budgets, bills, bailouts, and busts. The American Recovery and Reinvestment Act of 2009--commonly referred to as the “stimulus package”--contains so many new line items that even lawmakers can’t keep track of them all. But for investors, first-time home buyers, and students of Trump University, three elements of the stimulus package carry particular significance. Let’s look at them:
1. First Time Home Buyer Tax Credit
If you are a first-time home buyer, you can claim a federal tax credit of up to $8,000 if you buy your house between January 1 and December 1 of this year, 2009. (A first-time home buyer is an individual who has NOT owned a principal residence in the last three years.)
The stimulus tax credit is for primary residences only (in other words, no rental properties). In addition, you cannot sell the house within three years or you lose the credit.
In order to take advantage of the $8,000 tax credit, simply claim it on your tax return. If any of the credit amount remains unused, the IRS will refund it to you BY CHECK!
2. Higher FHA Loan Amount Limits
The stimulus package will also allow HUD's Federal Housing Administration (FHA) to temporarily increase its loan amount limits and insure larger home mortgages in high cost areas of the country. This means more people will be eligible to purchase or refinance their homes using affordable, FHA-insured mortgages.
The FHA home loan limits will now range from $271,050 to $729,750. The maximum FHA loan amount of $729,750 will only be applicable to extremely high-cost areas such as New York, Los Angeles, San Francisco and Washington, D.C.
Increasing loan limits means that--even as conventional lenders tighten their standards--you have an excellent chance of securing affordable financing! Check with a local FHA-insured lender as to what the maximum loan limit amount is in your area. This change in loan limits will only last until December 31, 2009.
3. Home Energy Tax Credits
The federal government wants you to raise your comfort level and lower your energy bills by installing energy-efficient doors and windows, insulation, air conditioners, furnaces, heat pumps and boilers. And they are willing to give you a nice federal energy tax credit for doing it.
For windows, doors, insulation and other similar projects that tighten up the "shell" of your home, the credit is limited to the cost of materials. However, if you buy a new air conditioner, furnace, heat pump or boiler that meets the energy-efficient guidelines, you can include the cost of installation in the energy tax credit.
So if you can initially come up with the cash, you can recoup a nice chunk of your costs when you file your 2009 taxes. For instance, you can receive 30% of the cost of these items, up to a lifetime cap of $1,500. The tax credit is for primary residences only, and is actually available for 2009 and 2010. Just make sure that any product you’re buying is eligible for the credit before making a purchase.
Tried-and-True Real Estate Incentives You Already Had
Other than the higher FHA loan limits, most of the new (real estate-related) provisions in the stimulus package are geared toward first time home buyers. But don’t forget: Homeowners and real estate investors still have all the tax-related benefits they’ve always had. Some of those are:
- Mortgage interest deductability
- Real estate tax deductability, and
- The $250,000/$500,000 capital gains exclusion.
Local Government Programs
Beyond the federal tax incentives (discussed above), there are hundreds of government grants, loans, and subsidies available. The federal government in Washington, all 50 states, and every major city have made affordable housing a priority. In other words, governments at every level are committed to increasing the stock of affordable housing in this country with real estate investing.
How do they do that? By offering generous grants, subsidies and low-cost loans to people just like you who are willing to buy real estate properties, or build, and put that property back into the pool of affordable housing.
How do they do that? By offering generous grants, subsidies and low-cost loans to people just like you who are willing to buy real estate properties, or build, and put that property back into the pool of affordable housing.
Because dozens of agencies offer programs--at every level of government--there are literally hundreds of community programs available to you. Some are available to investors; others are available to residents only.
And it’s not just major metropolitan areas where you can get government money for real estate. Believe it or not, even agencies like the Department of Agriculture’s Rural Housing Service (RHS), offer grants to assist low-income families through direct loans to buy, build, rehabilitate, or improve housing.
If low cost funds and “free money” interest you, get in on the action. The most comprehensive listing of federal programs, for education, career or business, can be found in the Catalog of Federal Domestic Assistance (CFDA). Within it, you’ll find detailed information on each program. A print edition of this catalog can be obtained at most public libraries, or purchased at the U.S. Government Printing Office (GPO) at www.gpo.gov. For a downloadable version, visit www.cfda.gov.
The CFDA provides a full listing of all federal programs available to state and local governments (including the District of Columbia); federally-recognized Indian tribal governments; territories (and possessions) of the United States; domestic public, quasi-public, and private profit and nonprofit organizations and institutions; specialized groups; and individuals.
Once you find the assistance program you want, contact the office that administers the program for application instructions. Contact numbers are included within the catalog.
Whether it is government grants, part of the new real estate tax legislation, or write-offs that have been around for a while, real estate offers incredible financial benefits to everyone. Make sure you take advantage of some of them to stimulate YOUR economy in 2009.
