Election results: home ownership issues

SO SO close, the experts say. Too close to call? In eight days, voters in America will decide who should be their Commander-in-Chief for the next four years. Reports say the undecided will decide by then, yet I am guessing some will never decide. What would the results look like if 90% of voter-age citizens were registered and 80% of those voted?

I don’t recall the exact percentage of registered voters that actually vote, but it was an amazingly low number. Since I became of age, many have bemoaned the low turnout. We know they are not supposed to complain if they don’t vote, but we also know they will anyway. Loudly and relentlessly.

Some current issues and discussions would directly affect residential real estate. The limitation or elimination of the home mortgage interest deduction has been tossed around as a means to help with the deficit and national debt. Big Bird might lose his subsidy, too. And then there is the “home sales TAX” that has been reported incorrectly almost everywhere. That’s the one some say will be levied on home sales, coming next year.

My understanding, from research and reading, is that this new TAX will be assessed on a limited number of home sales. This comes out of the Affordable Care Act (sometimes referred to as Obamacare) which brings a plethora of emotions to the forefront plus a large amount of misinformation. Or so it seems.

Here is one link you might take time to click on   http://www.azcentral.com/business/articles/20120802new-tax-home-sales-overblown-rumor.html   Note the words “overblown rumor” contained within the URL above! Here is another one, from the National Association of Realtors website found at Realtor.org   http://www.realtor.org/topics/health-care-reform/top-10-things-you-need-to-know-about-the-38-tax

Presuming you read one or both pages from the above, you may consider yourself informed. For now, the TAX rumored to ruin homeownership as we know it seems to be quite limited in scope and may not affect the large majority of home owners upon sale. Besides that, so many homes have fallen in value that it would be glorious to find an example of someone that had a large capital gain on the sale of their home. We should be so fortunate!

Don’t forget, your “base” in the home is what you paid plus all of the money you spent improving it. Not the new Sub-Zero fridge or the new sectional, but the new bamboo flooring, the new roof, the new double pane windows, etc. You paid $450,000 and have put another $150,000 into it since purchase. Your base is $600,000. What do you think it will sell for next year, while the tax is in effect? You must have a capital gain to be subject to this tax, along with a host of other qualifying issues.

It will not be assessed or collected at closing. The numbers are calculated into the tax year within which the sale occurred, which is affected by your income that year and other “investment” income you reported. It is an IRS type of tax, not a transfer tax.

Let’s go back to the home mortgage interest deduction. Full disclosure: Alan Ball relies on it, to the extent it creates a deduction against my taxable income for that year. Many homeowners rely on it also. Yet others own their home free and clear and have no interest to deduct. Others are in year 15 or 20 of a 30 year amortization; the interest paid continues to shrink and the principal paid continues to increase each month. It seems it will have the most affect, when and IF is ever made into law, and only when its “effective” date arrives (some say 10-15 years from now) on those homeowners in the earliest part of a long-term mortgage payment schedule.

…Two hot issues that may not be all that hot upon further analysis. Yet they get lots of media play and give voters something to get excited about. As if we need more things to get excited about. Don’t forget to vote! Tuesday the 6th of November, 2012.

And don’t forget to contact me if you have a real estate question or just want to see what your home might sell for in today’s market. Your friendly blogger Alan Ball,  505-470-7153 and/or alanball2@gmail.com

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