Note To Congress: Back Off Of The Real Estate Market
Congress is considering new tax proposals that would place additional burdens on owners and investors in residential and commercial real estate. While this might not seem like a big deal to the average citizen, I can tell you the last thing our economy needs is a further collapse of the housing market. Read this blog, get the word out, then tell your Senators and Congressperson to back off of the real estate market!
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To say that the real estate market is fragile is a gross understatement. Having just seen the end of the Homebuyer Tax Credit, designed by our political leaders to re-energize the housing market, it is baffling to think that they are now considering laying down new taxes that will stifle its recovery. Didn't they just spend billions of dollars to try to restore the housing market? Are they now going to tax it back to where it was a year ago?
IRS Form 1099 For All Contractors
The first would require that ALL landlords file a 1099 for each contractor that they work with. While this doesn't sound like a big deal, let me tell you "the real deal" on the street.
This provision would only apply to the "little guy," the person trying to supplement his or her income with a real estate investment. Large property owners have to engage the services of property managers, and property managers are already required to provide an IRS Form 1099 to all contractors they do business with if they pay that contractor $600 or more in any given year.
So how does this new proposed law hurt the real estate industry? It will reduce the number of real estate investors over time. Most small investors do their own taxes and new forms are confusing and create a time burden. Many of these investors don't want to have to pay to have these forms filed, and so I can see them choosing to invest in "simple and less costly" investments.
Taxing Carried Interest At Ordinary Income Rates
You really do not need to understand the concept of "carried interest," rather you need to understand that Congress is attempting to link a form of real estate investment with a different taxation plan.
The worst thing about this proposal is that, for the first time, a particular type of real estate investment gain would no longer qualify for capital gains treatment. This is a terrible precedent. It opens the door to disabling the tax benefits that come through real estate ownership. Anything that creates a disincentive to own real estate is going to thwart the efforts previously made to restore the housing market.
Tell Congress To Back Off Of The Real Estate Market
Here is what you can do to help. You can tell everybody you know by sending them a copy of this article (click on the picture of the envelope below), and you can tell your Senators and Representative in Congress to "Back Off" of the real estate market by clicking on this link.