$15k homebuyer tax credit added by Senate to stimulus bill
UPDATES BELOW
The Senate has added a $15,000 homebuyer tax credit to the economic stimulus bill. This is different and far better than last year's $7500 tax credit for first time homebuyers that had to be repaid over 10 years. This bill would give all buyers of a primary residence purchased this year a credit of 10% of the purchase price up to $15,000. Read more by David Herszenhorn at the NY Times.
The measure was promoted by Republican Senator Johnny Isakson of Georgia, a former real estate broker (giving hope to all real estate agents that they too may grow up to be Senators or even President) who said it was modeled after a similar homebuyer incentive that led the country out of recession in 1975.
“Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”
Affordable mortgage rates combined with the tax credit should spur buyer demand and stabilize home prices. Fear of future price declines has kept many potential buyers on the sidelines rather than buying what they think could be a declining asset. I'll keep you posted as the economic stimulus package continues to be debated by the Senate and House.
UPDATE 1, Sunday Feb 8, 8:00AM
The bill has not yet been voted on by the Senate, once it is, it must be reconciled with the House and then signed by the President. However, here are further details as of right now:
The tax credit is 10% of the purchase price up to $15,000.
The tax credit is for one year from date of enactment.
The tax credit is for both new and existing homes.
The home must be a primary residence and must be owner occupied for a minimum of two years.
There is no income cap.
The tax credit is limited to the amount of taxes paid in any year but can be split up over two consecutive years if your total tax liability is less than $15,000 in one year.
UPDATE 2, Thursday Feb 12, 6:30AM
It would appear that the tax credit is dead or will be significantly cut back as negotiators from both the Senate and House reconcile the 2 bills. The current $7500 non tax credit (actually a no interest loan that must be paid back over 15 years) for 1st time homebuyers may also be changed in some way. Once again, until the final bill is signed into law, there is too much speculation over what the exact terms will be.
In the meantime, from CNN, Harry (Reid) and Nancy (Pelosi) have a catfight.
UPDATE 3, Saturday Feb 14, 8:00AM
The reconciled bill has now passed the Senate and House and is expected to be signed by the President. The bill amends the previous $7500 first time homebuyer tax credit and does not include the $15k tax credit for all homebuyers.
A tax credit of 10% of the value of a home up to $8k is available for first time homebuyers. First time homebuyers are defined as anyone who has not owned a home in the past 3 years. The tax credit will apply to the purchase of a primary residence from December 1, 2008 January 1, 2009 (updated and corrected February 18, 2009 7:00AM) through December 1, 2009 and does not have to be repaid. You must live in the home for 36 months. The value of the tax credit will be reduced or eliminated for higher income taxpayers.
FINAL UPDATE, Sunday February 15, 8:30AM. Click here for final details on the tax credit.