The Senate voted to approve a tax credit of 10 percent of the value of new or existing residences, up to a $15,000 limit.
Presently, only first-time home buyers receive a $7,500 tax credit, so this represents a significant change.
The cost of the proposed tax credit is an estimated $19 billion.
As the economic stimulus package continues to be hammered out, it is possible that the homebuyer tax credit may be changed or even eliminated.
But it does represent an attempt to accomplish two very important objectives: to put money directly into the hands of the general public, and to give a critical economic stimulus into the flattened housing industry.
Plans call for the stimulus package to be ready for the president by the end of next week.
*MetWest Update: 2/16/09 The Senate’s proposed tax cut did not make the final stimulus package expected to be signed today. The compromise reached is a tax credit of $8,ooo for first-time homebuyers making less than $150,000 jointly. The home must be purchased in 2009. Should the home be sold in less than 3 years, the credit would have to be repaid. More particulars will be available once the stimulus is signed by President Obama.
Refundable First-time Home Buyer Credit – Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. This proposal is estimated to cost $6.638 billion over 10 years. – FULL SUMMARY OF PROVISION FROM SENATE FINANCE, HOUSE WAYS & MEANS COMMITTEES – via FixHousingFirst.com
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