Tax Subsidies And The Housing Industry

The economy has never run out of problems. However, the recent downturn in the real estate industry has definitely taken its toll not only to homeowners but to the entire country. Property values continue to decline while the number of foreclosed homes continues to rise. Without assistance from the government, the industry will surely go down the drain.

The real estate industry has been receiving several forms of assistance from the government to help it get back to its knees. Such assistance comes in different form of programs subsidized by the government. The different programs, both old and new, aim to encourage homeownership.

The different government programs:

The government has several programs that help many own a home. Among them are the FHA loans and the VA Loans. Both are government insured. This means that if ever the borrowers default, the government will pay off the balance or the amount insured, whichever is applicable.

FHA Loans

The program aims to help low-income level individuals to acquire a mortgage loan. These individuals would not be able to qualify on their own due to their monthly earning. What the government does is to insure the application so that they would be able to have the chance to own a property. When the borrowers default, the lender would turn to the insuring government agency to recover payment or losses incurred due to the default.

VA Loans

Such loans are insured by the US Veterans Administration. This provides a more affordable portal for military personnel who served for a certain period during the World War II. Many qualify for this program, including the surviving spouses of the qualified veterans and more. Similarly, if the borrowers default, the US VA is obliged to pay the lender.

Tax provisions favoring the housing industry:

Another way of luring people to own a home is the tax benefits. Many tax provisions are in favor of the homeowners. Check out the several deductible items that homeowners can take advantage of. For many, a home purchase is a taxpayer’s dream, especially if they have mastered the deductible items.

First, the mortgage interest you pay is deductible as long as you itemize it. The homeowner can deduct up to one million dollars on mortgage loan. Meanwhile, you can deduct up to one hundred thousand dollars for the home equity debt. The real estate taxes are also deductible. Aside from that, you may also deduct the points you have paid during closing. These are just few of the things you can benefit from.

The debate on tax subsidies for housing:

Although many have benefited from the tax subsidies for housing, several also argue that this is not right. Experts argue that housing gets a huge percentage of government subsidies when there are other forms of investment needing it. Some even believe that most of the programs encouraging people to own homes are among the reasons why the real estate industry is in its current state. Being able to qualify for a mortgage loan due to government assistance does not equate to home being more affordable.

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