Tax Credit for Home Buyers Would Aid Housing, Economy
The foreclosure relief bill passed by the House and the Senate (H.R. 3221) contains a provision for home buyer tax credits. According to both the House and the Senate version, a buyer is eligible for a tax credit only if the house is used as the primary residence. However, the fine print is different in the two bills, says affordable housing consultant A.J. Johnson, an expert in the low income housing tax credit (LIHTC) program.
The House version contains a refundable 10 percent tax credit up to a maximum of $7,500 for first-time purchasers who buy a home prior to April 1, 2009. The tax credit could be repaid without interest over a 15-year period.
The Senate version permits a $7,000 tax credit that extends for two years, but only for houses that have been foreclosed upon. And, unlike the House bill’s time frame, the Senate required that a purchase be made within one year of the bill being enacted into law.
Housing advocacy groups have a problem with the Senate version of the tax credit scheme, which limits applicability only to houses that have been foreclosed upon. Many housing groups prefer a tax credit that applies to all residential sites. In addition, they want to see income limits increased in the House version, which makes eligible only those individuals with adjusted gross income from $70,000 to $90,000 ($140,000 to $160,000 for couples filing jointly).
A strong case can be made for adding an immediate stimulus to the current housing market, Johnson says. The general consensus is that the economy would benefit from “targeted” tax credit stimulus that would promote short- and long-term recovery.
Source: A.J. Johnson, A.J. Johnson Consulting Services, Inc.