$5,000 New Construction Buyer Tax Credit

On June 26, 2009 as a result of a special legislative session, Governor Beshear signed into law HB3, which contains incentives for new home purchasers. This measure recognizes the importance of putting people back to work in the hard hit construction industry as a means of increasing economic activity and tax revenues. We compliment the Legislature and Governor for their progressive recovery plan. A summary of their plan is below and detailed components of the bill follows

* In effect from July 26, 2009 to July 26, 2010. The new home must close during this period.

* Purchasers of new homes during that period will receive up to $5,000 non-refundable tax credit (non-refundable means that the credit will go against a tax liability to the state. i.e. if your state tax liability is only $4,200 you can only take a tax credit of $4,200, if your state tax liability is $6,2000, you can only take $5,000).

* The new home buyer must live in the home for at least two years or pay back the tax credit to the state.

* There is a total program cap of $25 million (5,000 homes or more depending on size of actual credits). The tax credit is over when that cap is reached or July 26, 2010 whichever comes first.

* Purchases are defined as anyone other than first time home buyers.

* The new home must be the home owner’s principal residence. A new home is defined as either detached or attached and has never been occupied.

* Within seven calendar days after purchase of a qualified residence, the qualified buyer shall submit a completed application for the new home tax credit on forms provided by the Kentucky Department of Revenue.

* The Department of Revenue will create a web site to explain the credit to the public and to keep track of the amount of the program cap dollars remaining.

Watch for additional information as the final regulations are published and check with your tax advisor to conform eligibility and benefits of the program

REALTORS® SAY HOUSING INCENTIVES HELP ECONOMY, SMALL BUSINESSES

Having a sound and well-functioning real estate sector is critical to our country’s economic growth and development, as well as the growth and sustainability of many small businesses, according to the National Association of Realtors®.

In testimony on Capitol Hill before the House Committee on Small Business, NAR President Charles McMillan noted that the real estate industry supports millions of jobs and services. “By enacting provisions that stabilize America’s real estate markets, you are helping small businesses and America’s communities thrive and prosper,” said McMillan, a Realtor® and broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth.

NAR shared its belief that the 2009 stimulus legislation has proven helpful to small business owners - which includes many Realtors® - most notably by beginning to stabilize the housing market and stimulate the economy. “Along with other tax bills passed in 2007 and 2008, the 2009 stimulus legislation included a number of provisions that are helping the nation recover,” McMillan said.

The focus of NAR’s testimony was on three provisions that are having a positive impact on the real estate industry - the first-time homebuyer tax credit, the elimination of the mortgage cancellation tax, and the SBA loan programs.

The 2009 stimulus increased the amount of the homebuyer tax credit to $8,000 and eliminated the repayment feature of the credit. It also extended the program up to December 1, 2009. “It appears the tax credit is now being embraced based on the number of inquiries we and our members are receiving and the increased activity in the first-time homebuyer market,” said McMillan.

NAR has asked Congress to take steps to ensure the tax credit continues to stimulate the housing market and help families achieve the dream of homeownership. “We hope Congress will extend the tax credit through next year and make the credit available to all purchasers of primary residences,” McMillan said. “Additionally, to be fair, we’d like the repayment requirement from the 2008 stimulus bill to be eliminated so families are not penalized for buying their home just a few months before the new legislation went into effect.”

The second provision is the Mortgage Cancellation Relief Act passed by Congress in 2007. The tax relief has been extended through 2012, but NAR would like to see this become permanent. “It just doesn’t seem right to further penalize a family that has acted responsibly and has lost their home or been forced into a short sale because of market conditions. Eliminating the tax on the excused debt will help many families begin to recover more quickly and maybe will allow them to once again own a home,” McMillan said.

Lastly, NAR addressed the Small Business Administration loan program that provides fee waivers for some of its SBA programs and new loan programs and raised guarantees. “We applaud these efforts,” McMillan said. “However, the SBA often deems independent contractors, which most Realtors® are, ineligible for its programs and its standards are not always evenly applied across regions.” Realtors® and other independent contractors are often denied access to SBA programs. NAR asked Congress for assistance in making these loans available to more small businesses helping them to grow and prosper.

“NAR thanks you for all of your efforts to date. We stand ready to work with Congress and the Obama administration in any way possible to find further solutions to stabilize the real estate market and restore a strong marketplace and economy,” said McMillan.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.