This text refers to the original $15,000 tax credit amendment for all homebuyers which has now been superseded. The tax credit is now $8,000 and is available for people who purchase a house between January 1, 2009 and November 30, 2009. Here is how to claim the $8,000 home buyer tax credit on your 2008 or 2009 tax return.
As senators jockey for position and work to coming to an agreement that will best help the American people and the overall economy, the stimulus plan originally pushed forward by Barack Obama is changing. Last night, the Senate voted to include an amendment to the bill which would provide a tax credit for homebuyers. If the bill passes the Senate, and if this amendment remains included when the Senate and House negotiate, and if the President signs the bill into law, anyone who purchases a house after the bill is signed into law will be entitled to a tax credit.
The credit would be 10% of the purchase price of the house, up to $15,000. This idea is modeled after a $2,000 tax credit for homebuyers that helped the country rise from a recession in 1975. The credit would be spread over two years. For example, if you buy a house with a purchase price of $300,000, you would qualify for the maximum credit of $15,000. The first year you claim the credit, you would receive $7,500, and you would receive the remaining $7,500 the next year.
Additionally, in its current form, the requirement to repay the credit over time will be waived. The estimated cost of this amendment is $18.5 billion. This credit, which was once set aside for first-time homebuyers, would now apply to anyone who purchases a house, including investors, speculators, flippers, and any family struggling to afford a place to call home.
So does it make sense to go out and buy a house this year if you weren’t planning to, just to receive this tax credit? I’m not so sure. The main driver for buying a house — one in which you plan to live, not one you with which you plan to invest, or more accurately, speculate — should be necessity. Incentives for purchasing an asset stands to prop up the price of that asset beyond the price the market sets for it on its own. This boost helps real estate agents and investors more than families.
Please keep in mind that the plans for this credit are subject to change until it the bill is signed into law by the President of the United States.
Are you more inclined to buy a house this year with the knowledge that you will receive up to a $15,000 tax credit if this bill is signed into law as it currently stands?
Update: the current text of this amendment stipulates that only houses purchased after the bill is signed into law will qualify for the $15,000 tax credit. The final rules will depend on what the Senate and House of Representatives agree to before sending the bill to the President.
February 11 Update: As of this moment, the idea of the $15,000 tax credit may be nothing more than a dream. According to reports following the compromise between the House of Representatives and the Senate, this benefit has been “significantly reduced.” It may be another day before we know exactly what that means.
February 12 Update: The $15,000 tax credit has been confirmed as being “significantly reduced” to $8,000 for first-time homebuyers only and only houses purchased before the end of November will qualify. This $8,000 tax credit will not need to be repaid, unlike the current $7,500 first-time homebuyers credit.
February 13 Update: The Senate and House of Representatives have both passed the compromise version of the stimulus bill. Read the complete stimulus bill here, and you’ll be a step ahead of many of the congressmen who didn’t have a chance to read it before voting.