The Senate is considering a number of changes to the $8,000 first-time home buyers credit. Spurred on by Sen. Johnny Isakson from Georgia, the adjustments being considered seek to expand the credit to spur the real estate industry.
Here are the changes some Senators would like to make to the original law.
Expand the maximum credit from $8,000 to $15,000. When the first-time home buyer credit was first suggested as an amendment to the Senate’s 2009 Stimulus Bill, home buyers would stand to receive a credit worth 10% of the purchase price of the house up to $15,000, and the credit would be distributed over a course of two years. This amendment did not end up in the final law. The limit was reduced to $8,000.
Eliminate income limits for the credit. In the current law, the amount of the credit phases out when the taxpayer’s modified adjusted gross income is over $75,000 (single) or $150,000 (married) and fully eliminated when income reaches $95,000 or $170,000.
Make the credit available to all home buyers. Home buyers qualify within the “first-time” label if they have not owned a home in the past three years. The current credit is limited to the first-time home buyers, but the new legislation making the rounds would change the rules so any home buyer would receive the credit.
These changes will benefit many people who are deciding whether to buy a house in this market. It should continue to increase activity in the real estate industry and provide more work for real estate agents. It could, however, encourage buyers to spend more for a house than they believe it is truly worth.
Real estate investors (speculators) will also like these new rules for the tax credit if they become part of the law. Overextended consumers and real estate speculators led us to overpriced real estate values, a bubble was formed, and eventually deflated or collapsed. Will these changes to the law, if enacted, just put the real estate industry back into a precarious position or will they put is back on the right path?
Updated November 11, 2009 and originally published June 18, 2009.