Employer Assisted Downpayment ProgramsJanuary 17, 2007Taxation Committee Federal Issues CommitteeThe following is for study only andhas NOT been approved by the Taxation, Federal Issues, Executive Committees, or the Board of Directors.
Issue: Should C.A.R., in conjunction with NARsupport income tax-based incentives for employer-assisted housing as part of a housing affordability strategy?
Action: Action is requested at this time to update current policy for possible upcoming legislation.
Options: 1.Support 2. Oppose 3. Neutral 4. Not Real Estate Related 5. Other
Due to the high cost of housing, employee downpayment assistance programs are becoming more frequent among employers as a means of attracting and retaining employees. However, under current law there are no incentives for employers to offer this benefit and this type of assistance is often treated as taxable income to the employee.During the 109th Congress there were bills in the House and Senate that attempted to allow employers a tax credit of up to 50% of $10,000 or 6% of the purchase price of the employee’s principle residence (whichever is less). Additionally, it would have allowed for an employer to take a 50% tax credit on rental assistance, capped at $2,000. The housing assistance for both purchase and rental would have been excluded from the employee’s taxable income.In order for an employee to be eligible for downpayment assistance they would have had to meet the following criteria. They must have been a first-time homebuyer, which includes a person who did not own a principalresidence two years prior to the purchase of the home. Additionally, to qualify the first-time homebuyer cannot have earned more than 120% of the median gross income of the area where the house is.Impact on REALTORS®:There is always a need and goal to allow more people to reach the dream of becoming a homeowner. That dream is traditionally hardest to reach for the first-time homebuyer. Tax incentives that help a first-time homebuyer achieve that dream also increase the amount of buyers that are in the market. Often, a first-time homebuyer is inhibited from purchasing a house, especially in higher cost markets, because they face issues finding resources for a substantial downpayment. Assistance programs such as these will allow more buyers to enter the market and therefore provide more opportunities for REALTORS® to assist first-time homebuyers reaching their goals while alsocreating new business.NAR Policy:In November 2006 NAR took policy on employee assisted housing programs which stated “that NAR support income tax-based incentives for employer-assisted housing as part of a housing affordability strategy.”C.A.R. Policy:In September 2005 C.A.R took the position to “SUPPORT” in concept the creation of employee benefit plans designed to a) give employers an incentive to provide their employees with housing downpayment assistance and/or b) make the downpayment assistance tax-free to the employees.When C.A.R. took policy in September 2005 concerning employer assisted downpayment programs it was specific to bills pending in the 109th Congress, H.R. 3194 and S. 1330. With the 110th Congress new legislation will have to be written concerning employer assisted downpayment programs which may differ from previous bills. While the bills of the 109th Congress focused primarily on tax credits as an incentive to the employer, future bills may expand and include alternative options as incentives. This updated policy allows C.A.R. to lobby on any tax incentive that is proposed instead of being limited to those that were found in bills during the 109th Congress.Should C.A.R, in conjunction with NARsupport income tax-based incentives for employer-assisted housing as part of a housing affordability strategy?