By M. Gwertzman, BankingMyWay
One of the most prominent casualties of the stimulus compromise deal reached on Wednesday is the $15,000 tax home credit for homebuyers that had been included in the Senate’s original plan.
Potential home buyers, sellers, and the housing industry as a whole had been looking at the credit as a substantial boost towards jump-starting home sales across the country. For now, they’ll all have to settle for a much more scaled-back provision: a more modest $8,000 tax-credit for first-time home buyers, a $500 increase over a similar credit introduced last year.
Just a few days ago, after extensive lobbying in Washington, home-builders and realtors alike had hailed the proposed $15,000 tax credit. Charles McMillan, president of the National Association of Realtors, had suggested the credit would lead to1 million additional home purchases. Toll Brothers Inc. (Stock Quote: TOL) CEO Robert Toll, whose company reported a 51% drop in homebuilding revenue in the first quarter, had said, "The $15,000 (incentive), I have no doubt, will make the greatest difference.” Pulte Homes Inc. (Stock Quote: PHM) CEO Richard Dugas had pushed for a credit of up to $20,000 or more, while Centex (Stock Quote: CTX) boss Timothy Eller had commented, "We have to absolutely stimulate the demand side of housing in order to begin provide some price support for the prices that are continuing to decline and, of course, absorb these continuing foreclosures."
The Congressional Budget office had priced the cost of the $15k tax credit at $35.5 billion. The estimate of the revised credit is closer to $3.7 billion, a substantial reduction.
Who qualifies for the first-time home buyer credit? A buyer who hasn’t owned a principal residence in the three years prior to purchase, and they must also meet the personal income restrictions. They also must own the new home for at least 3 years in order to avoid paying back the tax credit. The homes must be purchased between January 1 and August 31 to qualify for the credit.
Existing homeowners do get a tax break out of the stimulus plan: those who install new doors, windows or furnaces to increase energy efficiency could get as much as $1,500 back.
Both houses of congress are hoping to have final voting on the plan wrapped up by the weekend.
For first-time homebuyers who want to enter the housing market, or existing homebuyers who want to take advantage of low interest rates – use BankingMyWay’s mortgage rate search to find rates in your area.
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