By: Greg Swann, Phoenix Real Estate, Post Archive, RSS Feed
Posted: Thursday, November 12th, 2009, 8:16 am MST
Category: Big Mother, Flourishing, Group Therapy, Marketing, Real Estate
It’s cash-for-clunkers time in the real estate market.
Last week, in addition to extending the $8,000 first-time home-buyers tax credit for another six months, Congress added a new $6,500 tax-credit for move-up buyers.
The credit can be applied for homes selling for as much as $800,000, and the income limits exclude almost nobody.
You have to have lived in your home for more than five years out of the last eight, but that’s hardly an onerous restriction. And homeowners who have put down roots have equity.
Remember that capital gains on your primary residence are excluded from taxation if you have lived in your home for the past five years. But the way the government is spending money, that exclusion cannot last.
But, but, but… Your home isn’t worth what it was in December of 2005. That’s true, but it doesn’t change anything. The home that you can buy now was also selling for more four years ago.
Here’s the way things really shake out: If you have equity in your home, you can take that equity as a tax-free profit — for now. At the same time, you can snag the $6,500 tax credit. And you can do all of this at historic low interest rates.
If your house is worth $400,000 and you only paid $300,000 for it, you could reap a gain of $100,000 — which would save you thousands of dollars in taxes. If you wait for prices to go higher, you may wait a long time for a much smaller return. And the house you buy then will have appreciated, also.
I think we’re looking at a perfect storm for homeowners with equity: You can move now, take a tax-free gain, get a lot more house than you could have bought a few years ago, all financed with a low-interest mortgage. And then, next April, Uncle Sam will write you a big fat check for your trouble.
On second thought, this is less cash-for-clunkers than the taxpayer’s revenge…
Sell this idea! Feel free to share this idea with your clients and prospects — in your blog, by email, on the phone. This is big, and the more we talk about it, the bigger it will get. Yes, it’s insane, but for once the hardworking American people will be on the sunny side of insanity.