Will a $15,000 tax credit for buying a home replace the $7,500 interest-free loan for first-time homebuyers? Economic stimulus must still pass for Isakson's tax breaks.
As Republicans and Democrats dissect and renegotiate Obama’s proposed economic stimulus details, senators on both sides are proposing amendments to the version of the plan that passed through the U.S. House of Representatives. Yahoo! News (via the Associated Press) reported this exciting development through an article titled “Senate OKs $15,000 tax break for homebuyers.” What does this mean for those in the U.S. and how does it relate to the previously authorized $7,500 tax credit?
$15,000 Homebuyer Tax Credit for Buying a Home: Not Just First-Time Homebuyers
Republican Senator Johnny Isakson from Georgia succeeded in proposing a measure that obtained unanimous approval on Wednesday, February 4, 2009. According to a press release on his website, Isakson's amendment to the American Recovery and Reinvestment Act of 2009 would “provide a direct tax credit to any homebuyer who purchases any home…the tax credit would be $15,000 or 10 percent of the purchase price, whichever is less. Purchases must be made within one year of the legislation’s enactment, and the tax credit would not have to be repaid.”
According to the press release, taxpayers could claim the credit on a 2008 federal income tax return. The limitations appear to be that the purchase must be of a principle residence, and the credit would have to be recaptured (read: reversed) if the home is sold within two years of purchase. In other words, the home cannot be a second home like a vacation house or an investment property that isn’t the taxpayer’s primary residence.
How is the New Tax Break Related to the $7,500 First-Time Homebuyer Tax Credit?
Senator Isakson actually spearheaded the original $7,500 first-time homebuyer tax credit that is available to taxpayers who have bought homes since April 8, 2008. This tax break can be claimed on either a 2008 or 2009 tax return, depending on when the home was purchased, but the credit must eventually be repaid over a 15-year period.
The $15,000 tax credit provision in the proposed 2009 economic stimulus package would replace the $7,500 first-time homebuyer tax credit, with the key differences being the increased amount plus the fact that it would not have to be repaid.
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