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How do tax benefits work in the new housing law?

With this move, the aim is to create a favorable environment for lowering rental prices and increasing offers at affordable prices. The hope is to stimulate the rental housing market through tax incentives for homeowners.

The tax credit can be adjusted up to 90% depending on different requirements.

In general, today’s typical bonus rates are reduced from 60% to 50%. However, this percentage can be adjusted to 90% depending on the requirements being met.

The expert said: “The new tenant agreement sets low rents in a stressful area and a 50% reduction based on the same criteria as first leasing properties in these areas to young people aged 18-35 for the first time. There is,” he explained. Here is another scene.

60% Bonus (Rehabilitation or Improvement): Owners will receive a 60% tax credit when restoration or improvement work has been done on the home in the previous two years

70% bonus: in two cases

First time renting in a youth stress area. That is, new leases for young people between the ages of 18 and 35. When the home is rented out under a public housing scheme that limits rental income.

90% bonus (pressure zone drop): When a contract is signed in a stressed market zone, it includes at least a 5% reduction in rent relative to the previous lease contract

For example, a tenant with a rent of $800 applies for a 5% reduction, so the price remains at €760 per month. This, with a net gain of 6,384 dollars (currently taxed at 60%, or 3,830 dollars), plus the new law will achieve tax cuts of up to 90%, so the taxable amount will drop to 638 dollars. The concept of a stressful market is one of the novelties of housing law and is important in determining the Tax Advantages of Rental Property incentives available to tenants who own homes in the aforementioned areas. But what is a “stressful housing market area”?

Owners may lose money even with bonuses

The Rent Negotiating Agency (ANA) conducted the following calculations to determine whether small landlords “paid off,” as Minister Laquer Sanchez recently put it, by reducing their rental income by 5%, resulting in a 90% income tax bonus. The conclusion is that β€œin an area declared under pressure for three years, a rent of 700 dollars will last up to 8 years, and if the formula is accepted, the landlord will stop earning 1,252 dollars,” said Faustino de Vega. Rent negotiating agency. When this happens, small landlords lose because, at the end of the filing in the stressed area, the tax credit goes from 90% to 50%, while the 5% rent relief lasts until the end of the contract. Read Tax Benefits of Rental Property below;

What is a stressed market?

It must be clear that the government provides a framework, but autonomy itself decides whether to declare an area as stressed. In general, for an area to be considered stressed, two requirements must be met:

Prices are 30% above average income. The average cost of a mortgage or rent plus basic expenses exceeds 30% of the net income of the average household in the area.

For example, if an area has an average income of 1,500 dollars and rents are over 450 dollars, that area may be a clear candidate to be declared a tight area.

The price increase is higher than the CPI. Over the past five years, purchase or lease prices in the region have increased by 5 percentage points from their CCAA CPI.

For example, if the cumulative CPI over the past five years is 8% and the price of rent or mortgages has increased by 13%, the area will meet another requirement to be declared a stressed area.

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