The $819 billion economic stimulus bill passed by the House yesterday essentially changes the terms of the $7500 tax credit that was part of the Housing Recovery Act passed by Congress last summer. That bill was, for all intents and purposes, a no-interest loan in the form of a tax credit that had to be repaid over 15 years.
The present stimulus bill would make it a tax credit that doesn’t need to be repaid.
To earn the credit, buyers cannot have owned a home in for the past three years, and the new property has to be used as a main residence. The credit phases out for single people who earn above $75,000 and couples who earn more than $150,000. Buyers who earn more than $95,000 as individuals or $170,000 as a couple are inelligible for the credit.
Both the House and Senate versions of the bill make the credit retroactive to January 1, 2009. The Senate bill requires that you buy property before the end of August. The House version expries at the end of June. Buyers are required to keep the duplex three years in order to keep the money.
It gets even better. The credit can be claimed even if the amount earned exceeds what the buyer owes in taxes. In other words, if you owe just $3500 in taxes, you can still qualify for a full $7500 refund.
Now, it’s important to note that in the $7500 repayable tax credit currently in place, the credit on a property purchased in 2009 could be applied to either your 2008 or 2009 tax bill. In this version, you won’t get your refund until after you’ve filed your 2009 taxes in 2010.
The National Association of Realtors is continuing to push for this tax credit to apply to everyone who buys a home in 2009, and to have that credit available until year’s end.
The thinking is that by the time the House and Senate come to terms on the legislation, there could be very little time left to take advantage of the opportunity, no matter who it’s available to.