Proposed $15,000 Home Buying Tax Credit

Update 2/15/09: This proposed tax credit was removed from the final version of the so-called “stimulus bill” that was passed by our congressional representatives on Friday.

If you haven’t heard, Senator Johnny Isakson from Georgia, added a provision to the monstrous new stimulus bill that would give buyers of a primary residence, a $15,000 federal income tax credit. If passed, the provision would begin on the date of enactment of the law and would be effective for one year. If you are closing on a home or condo that will be your primary residence, I urge you to wait until we see if this bill passes. $15,000 is real money where I come from.

Daytona Beach Home Buyers

How would this law affect buyers of Daytona Beach homes and home sales in our area?

1. This provision is for your primary residence and does not include second homes, vacation homes or investment properties.
2. You need to pay $15,000 in federal income taxes to realize the full tax benefit. The government is not going to give you money that you did not pay in.
3. The provision is $15,000 or 10% of the purchase price, whichever is less.
4. You must not sell the home for two years, or you will need to repay that tax credit

The press release from Senator Isakson’s office states that credit could be applied to your 2008 taxes, if you purchase after the law is enacted. No, if you bought your house last month, or before the bill becomes law, you are not eligible for the credit. That’s why I’m advising that you wait.

Daytona Beach Homes Sales

The affect on sales could be very positive, but we need to consider that:

• Many Daytona Beach area homes and condos are being purchased as second homes or investment homes and are not eligible
• The tax credit does not help people get mortgage financing, that is still a huge issue
• Many people will not act because they are still afraid of falling prices

Still, the overall effect of a stimulus such as the tax credit should be very positive. It certainly won’t hurt. It makes purchasing a home more attractive for those who can benefit from the credit. Senator Isakson says that a similar credit that was available during a similar crisis in the 70s, had a positive effect on stabilizing prices and home sales.

Advice for Now

If you are closing on your primary residence in the next few weeks, delay the closing if you are eligible for the tax credit.  It could be worth up to $15,000 in your pocket. The stimulus bill should pass this week or next week and we will know by then if this credit survived.

Click here to read ==> Senator Isakson’s Tax Credit Press Release.

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