15K primary residence tax credit in stimulus bill

[30ashopper]

Hopefully Kurt won't get too mad that I've cross posted on this in politics, but after reading the amendment, I thought this might be an interesting real-estate discussion.

This tax credit actually looks pretty neat for anyone thinking of buying a home. The purchase has to be a principal residence you move in to within two years of the purchase. The deduction is equal to a maximum of 15,000.00 or 10% of the value, whichever is larger, and can be applied over two years after the purchase. You also have to buy the home within one year after the 2009 stimulus bill passes, so it's very temporary.

I can see a few loop holes in this. You could use this to buy a second home as long as you were willing to live there for a period of time that fell within the definition of a principal residence. I'm not too sure how long that is, maybe it's the two years out of five the IRS currently uses. The amazing thing about it seems to be that it's a deduction of your federal tax, so I guess if you bought a house for 150K, and had 15K in taxes, your net tax bill for the year would be zero.

I'm guessing there are going to be some people taking advantage of this. 15K is a lot of money.

Here's the amendment that was passed -

http://graphics8.nytimes.com/images/promos/politics/blog/04blog-isakson-amendment.pdf

 

[passin thru]

... a maximum of 15,000.00 or 10% of the value, whichever is larger ....

Whichever is smaller, right? $15K max, period.

 

[TooFarTampa]

Honestly this seems to be stimulus spending in its purest, most targeted form. It's the kind of money that should make many people sitting on the sidelines who can afford it and can get credit to dive in. And it could provide a cushion in case of further declines. What is not to like? If the government is going to be spending more money it doesn't have, this actually seems like a useful way to do it.

 

[scooterbug44]

If it has to be your primary home, why do they give you 2 YEARS to move into it? Sure some of the RE bat turds will take advantage of that one!

Also thought you had to start repaying it over a 15 year period so it's more like an interest free loan.

 

[Matt J]

If it has to be your primary home, why do they give you 2 YEARS to move into it? Sure some of the RE bat turds will take advantage of that one!

Also thought you had to start repaying it over a 15 year period so it's more like an interest free loan.

I believe you have to LIVE in the home for years of the 5 you own it to qualify as a primary residence.

 

[30ashopper]

If it has to be your primary home, why do they give you 2 YEARS to move into it? Sure some of the RE bat turds will take advantage of that one!

Also thought you had to start repaying it over a 15 year period so it's more like an interest free loan.

That was the old one they passed last year, this replaces it. This time around, it's real tax credit and there aren't any income restrictions.

info on the old one -
Federal Housing Tax Credit for First-Time Home Buyers: Tax Credit at a Glance

blurb on the new one (same site)-
Federal Housing Tax Credit for First-Time Home Buyers: Home

 

[30ashopper]

Honestly this seems to be stimulus spending in its purest, most targeted form. It's the kind of money that should make many people sitting on the sidelines who can afford it and can get credit to dive in. And it could provide a cushion in case of further declines. What is not to like? If the government is going to be spending more money it doesn't have, this actually seems like a useful way to do it.

Maybe. The way it plays out should be interesting. Initially sellers will probably feel they have buyers over a barrel, so I bet prices decline more slowly. But as the deadline approaches, we might expect to see a flurry of negotiations as both parties get nervous about missing out on an opportunity.

The thing I'd worry about as a buyer would be, after the deadline is past, do prices resume thier rapid decline? In which case that 15K you thought you saved ends up getting eaten up by a loss in value on your new home.

 

[destinsm]

Maybe. The way it plays out should be interesting. Initially sellers will probably feel they have buyers over a barrel, so I bet prices decline more slowly. But as the deadline approaches, we might expect to see a flurry of negotiations as both parties get nervous about missing out on an opportunity.

The thing I'd worry about as a buyer would be, after the deadline is past, do prices resume thier rapid decline? In which case that 15K you thought you saved ends up getting eaten up by a loss in value on your new home.

ding, ding, ding, ding... we have a winner!!!!

This is just kickin' the can down the road...

When median home values are 3x median income all will be good. Anything else is burdening our future to try to maintain a life we can't afford today!!!

 

[SHELLY]

ding, ding, ding, ding... we have a winner!!!!

This is just kickin' the can down the road...

When median home values are 3x median income all will be good. Anything else is burdening our future to try to maintain a life we can't afford today!!!

...ah oh--apparently there's a fatal flaw in their plan. The government and industry didn't count on the fact that there just might be folks out there smart enough to connect the dots.

.

 

[Matt J]

...ah oh--apparently there's a fatal flaw in their plan. The government and industry didn't count on the fact that there just might be folks out there smart enough to connect the dots.

.

Isn't that the US way? Pass the buck, let the next generation deal with it, do it tomorrow or, of course my favorite, never do today what you can load on the backs of your grandchildren.