The housing tax exemption lives!

The government wants to increase the tax exemption on gifts that parents give to their children, so if your folks were inspired by the largesse of Yasuko Hatoyama to her three kids–one of whom is the prime minster and got into hot water because of that largesse–they’ll be able to give you up to ¥20 million tax free, if land minister Seiji Maehara gets his way.

According to the media, however, he may not get all he wants. Maehara is in charge of keeping the housing market humming, and following the Liberal Democratic Party’s lead last spring, when the former ruling party allowed tax exemptions for gifts of up to ¥6 million as long as they were spent to buy or improve residential housing, he wants to increase the exemption in the next budget.

Basically, the idea is that there is some ¥1,400 quadrillion not circulating in Japan, but rather just sitting in people’s back accounts or in their mattresses (or, to put in Japanese terms, in the tansu, or wardrobe). About half of this dormant money is in the possession of Japan’s elderly. Normally, when these people die, the money goes to their offspring, who, in turn, just put it into their own back accounts or in their own wardrobes. Since people live quite long in Japan, their children usually are already settled with their own homes when their parents die. The LDP’s scheme was to persuade these older people to give some of their money to their kids (or grandkids) earlier, while they’re still alive, at a time when they are thinking of buying homes.

At the time, the Democratic Party of Japan opposed the exemption, saying that it basically subsidized the rich, but now that the shoe is on the other foot the DPJ seems ready to increase the exemption. Or, at least some of its members do. Finance minister Hirohisa Fujii is against the exemption since it would add to the deficit. The media is predicting a compromise–a ¥15 million exemption rather than a ¥20 million exemption. Even with that, experts are saying it could stimulate the housing market by ¥700 billion, especially the urban housing market. The inventory of unsold condos in the big cities is a big headache for the real estate industry, and such a large exemption seems to be for the benefit of sellers of more expensive properties. So if your parents are worried about all the inheritance taxes the government will grab when they pass away–just as Yasuko Hatoyama was–tell them they can give you some if the exemption is passed, as long as you buy a house with it. And unlike in Yasuko’s case, it’s legal!

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