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Friday, February 6, 2009

New $15,000 Tax Credit?

Recently the news has been inundated with stories featuring the new stimulus package currently being considered by the U.S. Senate. While partisan politics has definitely played its role in the different amendments to the bill, one measure submitted that was unanimously passed by the U.S. House of Representatives. This provision would provide a tax credit of as much as $15,000 or 10 percent of the purchase price of the home whichever is less to anyone buying a primary residence during a one-year period beginning on the date of enactment.

This supersedes the $7500 tax credit that has been in effect since June of last year. However, the difference is more than just the amount of the tax credit. The $7500 tax credit is essentially an interest-free loan which must be paid back over the course of 17 years. According to U.S. News and World Report this new tax credit does not have to be paid back. It is yours as long as you occupy the new property as your primary residence for at least 2 years.

This measure also stipulates that you can claim this credit on your 2008 taxes even if you buy your home in 2009. So the $15,000 could be an immediate boost for those in position to buy a new home. Many may argue that this measure will probably just be cut from the legislation before it is passed, but as I write this the news is that the Senate has already agreed to the stimulus and will be passing it on to the President soon. The date on which the President signs this bill will be the first date that you will be able to qualify so if you are about to close a deal, you might want to hold off for just a little longer.

Mullins, L.. (2009, Feb. 6). The $15,000 Home Buying Tax Credit: 6 Things to Know. U.S. News and World Report Retrieved Feb. 6, 2009, from http://www.usnews.com/blogs/the-home-front/2009/02/06/the-15000-home-buying-tax-credit-6-things-to-know.html.

3 comments:

Matthew Hellewell said...

As a potential home buyer, this is very interesting. Not exactly what I am looking for (as my tax liability is such that I won't qualify for the full 15K regardless of my home purchase price), but quite nice that one does not need to pay it back, like the current 7500.

The simplest plan to me would be to immediately credit a new home buyer 10% or 15K (especially if this can be used as a down payment), but this proposed plan would in effect give two stimuli: the first to the mortgage companies, realtors, etc. The second one comes in the next year, when, after their taxes are filed, they find themselves with another 7500 (max), and surely a large portion of that would go to various entities (retail, etc.) because I am not naive enough to think that the majority of people are going to save any significant amount. Many will surely rationalize that this is free money, and they will treat it as such.

Blake and Jackie said...

My question is can I use this as part of my down payment?

Daybreak Man said...

Blake and Jackie,

Well, from what I can see you are a veteran so you can get a VA home loan with 0 down. Not to mention that many lenders are using programs that essentially treat the new 8k as a down payment. Good luck in finding your home and thank you for serving our country.