A major new piece of tax legislation that would benefit thousands of American homeowners--but could bedevil real-estate investors for years--rolled toward formal introduction on Capitol Hill this week.

Known as the Fair Tax Act of 1983, the bill represents the most ambitious, politically astute effort at wholesale reform of the federal tax system attempted in more than two decades.

It also represents one of the most ominous legislative challenges looming on the horizon for anyone who makes use of the current, large array of tax incentives for real-estate investment--from small-scale rental housing to large commercial properties.

Depending on your family-income level, the amount of real property you own and the degree of your dependence on capital-gains treatment for investment returns, you could either be a big winner in future years under the "Fair Tax" provisions, or a long-term loser.

Either way, you ought to know what's in this new bill. You ought to know who's lining up quickly behind it, where it's all heading and why property owners ought to focus seriously on it.

Here's a briefing:

The Fair Tax Act is the joint product of two of Capitol Hill's influential younger members, Sen. Bill Bradley (D-N.J.) and Rep. Richard Gephardt (D-Mo.), both of whom sit on key tax-writing committees of their houses.

The bill gained the public endorsement last week of Walter F. Mondale, a leading Democratic presidential candidate, and is considered virtually certain to be the tax-policy core of the Democratic Party's platform next year, no matter who leads the national ticket.

Segments of it also appeal to legislators on the Republican side of the aisle--ranging from rock-ribbed flat-taxers to moderate reformers fed up with the Byzantine complexities of the current federal tax code.

Stripped to its essence, the Bradley-Gephardt bill is a tax-simplification plan aimed squarely at attracting support from the majority of American households. It would cut the tax brackets of an estimated 80 percent of America's families to a flat rate of 14 percent per year; raise the standard deduction to $3,000 for single returns ($6,000 for joint); and allow personal exemptions of $1,600 ($3,200 joint), plus $1,000 per dependent. Current deductions for home-mortgage interest and real-property taxes would continue, as would tax deferrals of gains on home resales.

In short, for that 80 percent of taxpayers with adjusted gross incomes of $25,000 or less ($40,000 on joint returns)--many of whom own their homes--the Bradley-Gephardt plan would generally mean lower taxes and less red tape.

For taxpayers with incomes of $25,000 to $37,500 ($40,000 to $65,000 for joint filers), there would be a 12 percent surtax on top of the 14 percent flat rate. The 26 percent effective marginal rate, however, would still be lower than that which many of the same households currently pay. They would retain their two key housing deductions--mortgage interest and real-estate taxes--as well as the tax-deferred resale rollover.

For single taxpayers with more than $37,500 in income, and joint-return households with more than $65,000, the Bradley-Gephardt tax bite would go up to 30 percent of adjusted income, again with no loss of deductions on residences. On the surface, at least, everyone would be paying federal taxes at cut rates.

In exchange for those lower rates, however, the Fair Tax plan would eliminate about 100 of the investment incentives and preferences in the federal tax code today. The 60 percent tax-free exclusion allowed on long-term gains, for example, would be ended. Depreciation of residential, commercial and other income-producing real estate would be put on a 40-year schedule, up sharply from the current 15 years. Tax credits that benefit specific real-estate sectors requiring special assistance--such as historic and other older buildings in need of rehabilitation, or energy-conservation improvements installed by single-family homeowners--would disappear.

Homeowners over 55 years of age selling residences would face limited taxation on portions of gains rather than the current $125,000 tax-free exclusion. Rental property owners could take interest deductions only to the extent of the income generated by those holdings--eliminating the traditional advantages of high-ratio real-estate financing.

The "price" of the Fair Tax plan's lower tax rates for the bulk of American taxpayers, in other words, would be paid by sectors of the economy that have grown to depend on tax incentives over the years, responding to congressional amendments to the federal tax code.

How big a price you--or your business--would pay in the future for the Fair Tax would be directly proportional to your reliance on those congressional carrots served up in the past.

Next: The Net Impact on Real Estate