Clearly the federal government wants its citizens engaged in the housing market again. As part of the original 2009 stimulus package, a 15000 tax credit for homebuyers is emerging as an incentive for those who are considering this investment. The $15000 tax credit bill is yet to be a federal law, but its passage in the Senate sets the course for its approval. So far, it is yet to be signed by the House, indicating that its terms are still subject to change.
So what is this $15000 tax credit and who is eligible? Georgia Senator Johnny Isakson (R) is the prime sponsor of this bill. As a former real estate broker I s a k s o n believes it will work just as a similar bill worked in the mid-1970’s when America faced a surplus of foreclosed and vacant homes. Isakson believes that passage of that $2000 tax credit resulted in home value stabilization, a decrease in housing inventories, and most importantly, a housing market recovery.
The existing bill still under consideration hopes to provide a tax credit to any homebuyer purchasing a home – not just first time homebuyers. This translates to any home occupied as a primary residence including condos and single-family homes whether they are foreclosed, new, or previously owned. A tax credit ceiling of $15000 or 10% of the purchase price– whichever is less– is written into the current form of the 15000 tax credit. Any homebuyer is eligible for the credit within one year of the bill’s passage and the tax credit is exempt from repayment – unlike last year’s $7500 tax credit. That tax credit was actually a 17-year repayment, consequently making it a no-interest loan. Income limits or any retroactive action on the 2009 bill is yet unresolved. And as far as the homebuyers 2008 tax return, this bill allows taxpayers t o c l a i m t h e c r e d i t as if the purchase was made on December 31 of 2008, even though the purchase takes place in 2009.
Of course the federal government is seeking to insure against misuse, which is why the 15000 tax credit is restricted to purchases to one’s principal residence. Additionally, if the home is sold within two years of purchase, the government automatically recaptures the credit. And what about the last year’s $7500 housing credit for first-time buyers? Enactment of the $15000 tax credit would put it to rest.
Confused? There are no concrete answers at this time. This tax credit is part of the massive and controversial economic stimulus package. However, there is more information regarding the $7500 tax credit through your agent or at the IRS website at www.irs.gov/newsroom/article/0,,id=186831,00.html. Until the $15000 tax credit bill is signed by the President, there will continue to be questions.
Update: The $15000 bill was negotiated in committee and decreased to $8000. Please read my next article – The New and Approved $8000 Housing Tax Credit – for further information.