Home Buyer Tax Credit, Part III

I have another update on the topic of a home buyer's tax credit, which I blogged about in a January post as well as last August.

As you know, a new federal tax credit went into effect last year that provides a $7,500 tax credit for first-time home buyers. Its intention was to drum up home sales, which as you could probably guess didn't work out as planned. Many people blamed a provision of the tax credit that required the recipient to pay back that tax credit over a 15 year period. So it was argued that it wasn't even a tax credit to begin with, rather a 15 year interest-free loan.

Improving the tax credit became a major focus of the federal government's economic recovery package. The Senate voted to not only increase the tax credit to $15,000 and delete any repayment provision, but also to make it available to all primary home buyers. It's estimated that this would amount to a $35 billion tax credit for U.S. home buyers.

The House of Representatives did not go along with the Senate, and the legislation agreed to by both houses of Congress is a much lower tax credit. The bill, which President Obama is expected to sign into law on Monday, will simply delete the repayment provision and raise the tax credit to $8,000. It's still only available to first-time home buyers. It's sure to disappoint those who already set their eyes on a juicy tax credit. But we can expect that powerful housing lobbying organziation will continue to fight for a bigger tax credit to stimulate home sales.

For more about the economic stimulus package, read this Chicago Tribune article.

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