The tax credit has been scaled down to $8,000 from $15,000, or 10% of the value of the home for any first time homebuyers who purchase homes from the start of the year until the end of November. It starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Although this is not the final version that may be signed into law, it appears that this is closer to reality than the $15,000 credit turned out to be.
Tough times call for courageous measures. In just such an action, and with a resounding chorus of â€œAyes,â€ the U.S. Senate voted on an amendment of the American Recovery and Reinvestment Act of 2009 (H.R. 1), that, if approved, would allow a tax credit of up to $15,000 for the purchase of qualified homes. This effectively doubles the existing $7500 tax credit and will help, hopefully, to pry open doors for more to be able to purchase a home in 2009.
Not only does this move increase the existing tax credit, more importantly it will include both new AND existing resale homes. This is certainly good news for builders.
If the bill passes through the House and is subsequently signed by the President, then 2009 buyers could look forward to qualifying for a tax credit of 10% of the purchase price with a cap at a limit of $15,000. This amendment would also give taxpayers the option of splitting the credit equally over a 2 year period.
Additionally, and possibly even more important, the change would be applicable to all buyers â€“ not just first time buyers as has been the case with the old bill. In other words, the existing $7,500 tax credit has only been accessible to first time buyers. The proposed amendment allows ALL 2009 primary home purchases to qualify. There is the one significant caveat: investor based purchases will not qualify. Investors, those considered to be more financially secure in the existing marketplace, would still have to go it on their own with no credits. There are already existing tax breaks for those purchasing investment properties. These will remain in place.
If everything goes as planned, President Obama could sign this legislation into law very shortly.
How does this affect homebuyers? Many have been shell shocked by plummeting prices. We frequently hear buyers telling us that they are afraid to proceed for fear of loosing equity once they move into their home. For many, the money they invest in their down payment is the result of hard work and years of saving. They donâ€™t want to take any risks they think could backfire, resulting in the loss of their hard earned cash.
It is hoped that in a climate of declining values and increasing difficulty securing financing, this move by the Senate will be the necessary impetus to move buyers off the bench and into the game.
Check with your accountant or tax preparer for full details.