As senators jockey for position and work to coming to an agreement that will best help the American people and the overall economy, the stimulus plan originally pushed forward by Barack Obama is changing. Last week, the Senate voted to include an amendment to the bill which would provide a tax credit for homebuyers. If the bill passes the Senate, and if this amendment remains included when the Senate and House negotiate, and if the President signs the bill into law, anyone who purchases a house this year will be entitled to a tax credit.
The credit would be 10% of the purchase price of the house, up to $8,000. This idea is modeled after a $2,000 tax credit for homebuyers that helped the country rise from a recession in 1975. The credit would be spread over two years. For example, if you buy a house with a purchase price of $300,000, you would qualify for the maximum credit of $8,000. The first year you claim the credit, you would receive $4000, and you would receive the remaining $4000 the next year.
Additionally, in its current form, the requirement to repay the credit over time will be waived. The estimated cost of this amendment is $18.5 billion. This credit, which was once set aside for first-time homebuyers, would now apply to anyone who purchases a house, including investors, speculators, flippers, and any family struggling to afford a place to call home.
So does it make sense to go out and buy a house this year if you weren't planning to, just to receive this tax credit? I'm not so sure. The main driver for buying a house-one in which you plan to live, not one you with which you plan to invest, or more accurately, speculate-should be necessity. Incentives for purchasing an asset stands to prop up the price of that asset beyond the price the market sets for it on its own. This boost helps real estate agents and investors more than families.
Please keep in mind that the plans for this credit are subject to change until the bill is signed into law by the President of the United States.
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