US Senate Approves Homebuyer Tax Credit

by Leroy Baker, Tax-News.com, New York

09 February 2009

The US Senate has unanimously approved an amendment to stimulate the nation’s declining housing market by offering a USD15,000 tax credit to individuals who purchase a home in the next year.

“It is time to fix America’s problem, not throw money at the symptoms. It is time to fix housing first. It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous,” said Sen. Johnny Isakson, the Georgia Republican who introduced the bill.

“We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history and repeated a method that worked by adopting this amendment," he added.

Specifically, Isakson’s amendment to the pending economic stimulus bill would provide a direct tax credit to any homebuyer who purchases any home. The amount of the tax credit would be USD15,000 or 10% of the purchase price, whichever is less. Purchases must be made within one year of the legislation’s enactment, and the tax credit would not have to be repaid.

The amendment, approved on February 4, would allow taxpayers to claim the credit on their 2008 income tax return. It also seeks to prevent misuse by only allowing purchases of a principal residence and by recapturing the credit if the home is sold within two years of purchase.

Last year, Isakson introduced legislation to specifically target those homes that were causing the unprecedented increase in housing inventory by offering tax credits to individuals purchasing a foreclosed home or a home where foreclosure is pending. In April 2008, the Senate passed legislation to stimulate the nation’s declining housing market that included Isakson’s proposal. However, the final version of the legislation that was signed into law included only a USD7,500 tax credit for first-time homebuyers that must be repaid over a 15-year period. Isakson’s new amendment would sunset that USD7,500 tax credit.

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