Friday, February 13, 2009

$15,000 Homebuyer Tax Credit Trimmed In Negotiations

The Senate’s version of the economic stimulus package included a $15,000 homebuyer tax credit that would have been made available to all homebuyers. As I expressed in a blog post earlier this week, I didn’t think that it was such a good idea, and definitely not at the cost of almost $40 billion in taxpayer money. Thankfully, this credit was cut in House and Senate negotiations. The final version of the bill includes an $8,000 tax credit, which will be available to only first time homebuyers. A previous version of this tax credit was for $7,500, and was required to be paid back. This new tax credit will not need to be paid back as long as the homebuyer lives in the home for at least 3 years. The cost for this version should only cost taxpayers around $6.6 billion according to CNNMoney.

I’m not one to support any amount of artificial support for the real estate market, because I see it as unsustainable. However, if anyone is going to get a tax credit to buy a home, it should be first time homebuyers. These are the people that are entering a real estate market where prices are too high to begin with, and they need all the help they can get. I would have preferred a minimum ownership timeframe longer than 3 years, though. Anyone who was able to sell their home during the bubble should qualify. Turn that 3 years into 6 or 7, and that should do the trick.

Will this $8,000 tax credit be enough to turn the real estate market around? I doubt it, but at least taxpayers are only going to lose $6.6 billion instead of almost $40 billion, and the people getting the money will be more deserving. It is a small victory, but better than nothing I suppose.


Anonymous said...

can this be ammended on your 2008 tax return if you close in March.

The 15,000 dollar credit had a 5% down payment clause, does this one?

Eric Ames said...

I don't know for certain, but I believe you have to use the tax credit on your 2009 and 2010 returns. I also haven't seen details yet on any sort of down payment clause, although, it is probably pretty moot. There really isn't 100% financing available anyway. At least from traditional sources, the highest I'm seeing right now is 95%.