The new tax credit for first-time homebuyers that's included in the economic stimulus package was far less than the $20,000 the homebuilding industry wanted. Analysts expect the credit of 10 percent of the value of a home, up to $8,000, to provide only a modest boost to the battered U.S. housing market. Last year, Congress enacted a $7,500 tax credit for first-time buyers, but that had to be paid back over 15 years and the impact on home sales was negligible.
The tax credit is part of the economic stimulus package expected to be signed soon by Obama. It was scaled back from a Senate proposal of $15,000 and is limited to first-time buyers who act between January 1st, 2009 and December 1st, 2009. First-time buyers are defined as those who haven't owned a house for at least three years.
The credit of 10 percent of the value of a home, up to $8,000, if approved, would cost the government an estimated $6.6 billion. It would start phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers would have to repay the credit if they sold their homes within three years.
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Jolenta Averill, Principal
Lake & City Homes Realty