The $15,000 Home Buying Tax Credit: 6 Things to Know

Many blog readers have asked for details about the home buyers tax credit amendment that was recently added to the Senate version of the economic stimulus package. The provision would provide a tax credit of as much as $15,000, or 10 percent of the home’s price tag, whichever is less, to anyone buying a primary residence during a one-year period beginning on the date of enactment. Some common questions and answers are below. Here’s a list of six things to know about the proposed amendment.

1. I recently bought a home and qualified for the $7,500 new home buyer tax credit. Should this provision become law, would I qualify for it well? The answer is no. The effective date of the amendment is the date of enactment. If you’ve already completed a purchase, you would not be qualified for the new program.

2. The amendment would sunset the current $7,500 housing tax credit on the date of enactment. What does the term “sunset” mean there? In this context, the term “sunset” means that the $7,500 new home buyer tax credit would be supplanted by the proposed $15,000 credit, which applies to all home purchases, not just new homes. If you are operating under the $7,500 credit, that’s the one you have, Than, from the date of enactment forward, the new one takes over and nobody else gets the old $7,500 [credit].

3. What are the odds of this provision becoming law? The $15,000 home-buying provision is a component of the massive, and increasingly controversial, economic stimulus package. The House of Representatives has already passed its version of the stimulus bill, and the White House is putting pressure on the Senate to do the same. However, the size of the package–which now totals more than $900 billion, has prompted some Republic Senators to try and slash provisions to lower the tab. Still, some argue that the $15,000 tax credit enjoys strong support from the National Association of Realtors and the National Association of Home Builders, and will remain in the stimulus bill that is signed into law. They predict that the amendment would make it into the final package though. It is a targeted solution that will address housing as well as taxpayers, both of which need help.

4. Does this tax credit need to be paid back? No! That’s a key distinction from the $7,500 first-time home buyer credit, which was actually a 17-year repayment, which translates into a no-interest loan.

5. Is there an income limit or any other restrictions on participation? The tax credit would be limited to primary residences and does not come with income restrictions. You must occupy the property for at least two years as your primary residence. It applies to any home, meaning a condo, a house, foreclosed, new, or previously owned.

6. Can I take the credit during tax year 2008? Yes! Even if you buy a home in 2009, the provision would enable you to file your taxes as if you purchased your home on December 31 of 2008.

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