There has been plenty of coverage regarding the economic stimulus package and all of the pros and cons of it. The most significant part of the plan as it currently stands and that matters here on RealEstate-Ink is the proposed tax credit for homebuyers.
The Senate has passed an expansion of the original tax credit proposal. The proposal would be available to all purchasers (not just first-time homebuyers). The key elements are:· A tax credit in the amount of $15,000 or 10 percent of the purchase price (whichever is less), with the option to utilize the credit all in one year or spread it out over two years
· The tax credit is available to all purchases of any home from date of enactment for one full year.
· Able to claim the credit against the 2008 tax return
· Buyers must occupy the homes for two years as their principal residences
· Purchases of homes by investors are ineligible
· Terminates the previous $7,500 Housing Tax credit on the date of enactment
Keep in mind that this has not been passed into law and is subject to change at any second…remember this is Washington, D.C. and Congress we are talking about.
Below is some further detail on the current proposal:
Senate Unanimously Approves Isakson Amendment to Stimulate Housing Market
Homebuyer Tax Credit Revived Market in 1975 and Would Work Today
WASHINGTON – The U.S. Senate today unanimously approved an amendment by U.S. Senator Johnny Isakson, R-Ga., to stimulate the nation’s declining housing market by offering a $15,000 tax credit to individuals who purchase a home in the next year.
“It is time to fix America’s problem, not throw money at the symptoms. It is time to fix housing first. It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous,” Isakson said. “We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history and repeated a method that worked by adopting this amendment.”
Specifically, Isakson’s amendment to the pending economic stimulus bill would provide a direct tax credit to any homebuyer who purchases any home. The amount of 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.
The amendment would allow taxpayers to claim the credit on their 2008 income tax return. It also seeks to prevent misuse by only allowing purchases of a principle residence and by recapturing the credit if the home is sold within two years of purchase. The amendment would sunset the current $7,500 housing tax credit on the date of enactment.
Isakson has pushed hard for a non-repayable tax credit for homebuyers because he knows that it will work. In the mid-1970s, America faced a similar housing crisis when a period of easy credit and loose underwriting flooded the market with new construction. Interest rates rose, the economy slowed and America was left with a three-year supply of vacant homes. Congress responded by passing a $2,000 tax credit for anyone purchasing a new home for their principal residence. Isakson believes the results were clear and swift as home values stabilized, housing inventory dropped and the market recovered.
Last year, Isakson introduced legislation to specifically target those homes that were causing the unprecedented increase in housing inventory by offering tax credits to individuals purchasing a foreclosed home or a home where foreclosure is pending. In April 2008, the Senate passed legislation to stimulate the nation’s declining housing market that included Isakson’s proposal. However, the final version of the legislation that was signed into law included only a $7,500 tax credit for first-time homebuyers that must be repaid over a 15-year period. Isakson’s amendment that passed today would sunset that $7,500 tax credit.
Isakson spent more than three decades in the real estate business, beginning his business career in 1967 when he opened the first Cobb County, Ga., office of a small, family-owned real estate business, Northside Realty. Isakson later served as president of Northside for 20 years, presiding over the company’s growth into the largest independent residential real estate brokerage company in the Southeast and one of the largest in America.
Isakson has not made a decision regarding his vote on the overall economic stimulus legislation.
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What will the new year bring for housing and real estate? It’s easy to look at all the negative economic news in the headlines and say – there’s no sign that 2009 is going to be any better than 2008.