A simple explanation of the $15,000 tax credit for home purchase.

[Tennessee Gal]

This only applies to the purchase of home intended for a primary residence. It does not have to be a first time buyer. It applies to all buyers of a home for the use of a primary residence. It is in effect for one year beginning from the date the stimulus package is signed by President Obama, assuming this amendment remains in the final bill.

A tax credit has nothing at all to do with the price of the house. It is not deducted from the final sales price of the house.

A tax credit is deducted from the final taxes owed on page 2 of the 1040.




ON EDIT: I stand corrected.

[ima_sinnic]

1. does that have to be paid back, like the current $7500 credit? (nt)

[Tennessee Gal]

2. No.

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 $15,000 or 10 percent 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 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. The amendment would sunset the current $7,500 housing tax credit on the date of enactment.




http://isakson.senate.gov/press/2009/020409housing.htm

[here_is_to_hope]

28. Will this apply to 2009 taxes too? n/t

[county worker]

3. How does that help someone about to be foreclosed on?

This may get a few more houses sold and give a few realtors some income and give some people with the cash and credit rating the ability to buy a house and get a discount to boot but it does nothing to help people about to be homeless. I think it is a waste of my tax money! If you get a credit someone is going to have to make it up!

I have a house for sale. If this helps get it sold I can buy another one and get a tax credit. I am in no financial bind right now. Why help me and not those that need it?

[Tennessee Gal]

4. It only boosts the housing market, which is way down because of economic fears.

You should contact your banker or mortgage broker about your circumstances and you should most definitely contact your Congressional representative and Senators.

[Tennessee Gal]

9. If you are trying to sell a house, it may help you get a buyer sooner if they need the tax credit.

And then you will be able to benefit from the tax credit. Two birds with one stone.

[wryter2000]

12. It might help the neighbors some, too

The value of my house has gone down drastically. If house sales went up and there were fewer foreclosed properties in the neighborhood, it might turn my house value around. But it doesn't do anything to help someone in danger of losing their house.

[ret5hd]

5. What you are describing sounds like a tax deduction to me, not a tax credit.

A tax deduction is a decrease in the amount of money you are taxed on.

A tax credit is a direct reduction in the amount of taxes you pay.

on edit: unless i'm completely wrong, which is a possibility. someone let me know if i am wrong.

[Tennessee Gal]

6. No, you have that reversed.

[ret5hd]

8. from finweb.com

http://www.finweb.com/taxes/deductions-vs-credits.html

Let’s start with deductions. A deduction is an expense or an amount of money which lowers your taxable income. It is subtracted "off-the-top" from the amount of money you made throughout the year, your gross income. Once all deductions are subtracted, this amount is known as your adjusted gross income, or AGI. Examples of deductions include contributions to a traditional IRA, student loan interest that was paid during the year, tuition and expenses, alimony paid, and classroom-related costs for teachers. There are also deductions that are related to self-employment income. The standard or itemized deductions are subtracted from the AGI, yielding your taxable income. This is the number which determines the amount of tax that you owe.

Tax credits, on the other hand, are dollar-for-dollar reductions which are subtracted from your tax liability. Let’s say, for instance, that you qualify for a $100 tax credit. The government is, in essence, saying to you “We are giving you credit for having already paid $100 in tax." Therefore, $100 is subtracted directly from the amount of tax that you owe.

[Tennessee Gal]

23. You are correct. I am sorry.

Best explanation is to look at the 2008 1040 form line 69.

[ohtransplant]

14. You are correct sir.

(or ma'am - just quoting Ed Mc Mahon)

[ret5hd]

16. Yes, but the OP seems to be slow in acknowledging it.

[ohtransplant]

18. She must've gotten those spiffy examples from somewhere...

where she could verify whether it's a deduction or credit.

No worries. It should hit the papers soon anyway.

:popcorn:

[jsamuel]

7. What if you buy your house "again" by refinancing?

[Tennessee Gal]

10. Refinancing is not buying. It requires no sales contract.

[ret5hd]

11. Sell it to your spouse.

[DURHAM D]

13. I honestly don't know who this credit is designed to benefit.

I am sure it is not individuals. I have never heard anyone say that there are a lot of people waiting/wanting to buy a home - just a lot of people trying to adjust their current mortgage.

My guess as to who lobbied for this - lenders and large developers with too much inventory.

Won't this have the effect (again) of the lenders and real estate agents convincing middle class folk that they can afford way more home (a larger mortgage) than they reasonably can afford. I am sure that Wells Fargo and others are already figuring out some special programs/promotions that will allow unsuspecting buyers to take advantage of this tax credit only to find out that there are some big gotchas down the road in creative fees and higher interest on their loans.

This seems like a solution to a problem that does not exist - at least not for average citizens.

BTW, what do you know about the car purchase credit?

[bottomtheweaver]

17. Good analysis.

I heard Lamar Alexasseater on NPR whining about all the "programs" in the stimulus bill and pretending this idiotic nonsense should have top priority because it would help brokers, er, plubmers and "let Americans keep more of their money."

RePuke = "tax the poor but let me keep every cent I ever gouged." :mad:

[stray cat]

20. Those of us who haven't bought a home until we had money for a downpayment

and avoided interest only loans and variable loans in favor of renting a run down apartment until we could save enough for a legitimate loan.

[Kansas Wyatt]

15. So they are trying to create another BUBBLE...

So the same ills can be re-released on the country. Not only are Republicans stupid, they are insane too. They are certainly bankrupt of any morals, ethics, and integrity.

[stray cat]

19. A 15000 tax credit in this lending climate will never create a housing bubble.

If someone has 20% down and excellent credit and a secure good paying job they can buy a house and get a tax credit. Where I live that means for a cheap 300,000 condo I need 60,000 down - thats a far cry from interest only loans that helped get us into this mess.

[Kansas Wyatt]

22. Don't be so sure that they haven't got an angle up their sleeve.

They are looking to make a lot of money on this somewhere, which is usually the dumb peasants, or they would not have bothered.

[lizziegrace]

21. A credit is a reduction of taxes owed

not a reduction of taxable income. What you've described is a tax deduction, not a credit.

If a person owes less than $15k in taxes, does the balance come back in a refund or is it only to the extent there's tax due?

[Muttocracy]

24. yes and here's the text of the amendment and an excerpt about that

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4981659#4982181


I assume this means it can take your taxes to zero but not a refund?


``(2) LIMITATION BASED ON AMOUNT OF TAX.--In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

``(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

``(B) the sum of the credits allowable under this subpart (other than this section) for the taxable year.

on edit - you can also spread it across 2 years

``(3) ALLOCATION OF CREDIT AMOUNT.--At the election of the taxpayer, the amount of the credit allowed under paragraph (1) (after application of paragraph (2)) may be equally divided among the 2 taxable years beginning with the taxable year in which the purchase of the qualified principal residence is made.

[lizziegrace]

26. I like the fact that the taxpayer can elect to take the credit

over two years. That would allow more to take the entire amount if their tax liability was not $15k in a year.

I see that the credit is *not to exceed* $15k. I need to do more reading on this.

Thanks for the link.

[Riley18]

25. This credit or whatever they call it has finally convinced me that there will

never be any real help for those who need it most. This is just another political scheme to make the rich richer and screw the peasants. This is not the change I voted for last year.

[Muttocracy]

27. have you read the amendment itself? nt