A Tax Deduction Solution to the Housing Crisis

Since the energy debate has taken a backseat to the economy, I thought I might make some comments about the economy and a proposal to create real stimulus.  Several economists have said that the key to the turnaround in the economy is solving the housing crisis.

My solution to the housing crisis is to bring in private capital with tax incentives.  The private capital would come from real estate investors.  We need to quickly revise the tax laws on rental income property. We need to make it attractive to invest in rental property (single family homes and multi-family housing).  We have a large inventory of homes on the market and prices have declined significantly.

The tax laws that need to be changed are as follows:

1. Accelerate the depreciation deduction on property.

2. Allow improvements to be expensed in the year they occur.

3. Remove the passive activity loss rules and remove the maximum on deductible losses.  Remove the income limitations on losses.

The tax law changes would stimulate the economy through investment in housing as rental property.