New Housing Bill Expands Homebuyer Tax Credit

U.S. Senator Johnny Isakson, R-Ga., has introduced legislation to jump-start housing demand and to boost the economy by expanding the homebuyer tax credit passed by Congress last year.

The title of the bill is “To amend the Internal Revenue Code of 1986 to expand the application of the homebuyer credit, and for other purposes,” but is otherwise known as the “Fix Housing First Homebuyer Tax Credit Act.”

Last year, Isakson introduced legislation to specifically target those homes that were causing the unprecedented increase in housing inventory by offering tax credits to individuals purchasing a foreclosed home or a home where foreclosure is pending. In April 2008, the Senate passed legislation to stimulate the nation’s declining housing market that included Isakson’s proposal.

However, the final version of the legislation that was signed into law only included a tax credit for first-time homebuyers that must be repaid over a 15-year period. The legislation introduced by Isakson on January 15, 2009 would expand that tax credit to include all purchasers and would eliminate the current requirement that it be repaid.  Repayment of the tax credit would only be required if the home is sold within three years.

Specifically, Isakson’s new bill would also enhance the existing homebuyer tax credit by:

•  Extending the eligibility period for the credit to December 31, 2009;

•  Increasing the credit amount to 10 percent of the home price capped at 3.5 percent of FHA loan limits (geographically dependent) – ranging between approximately $10,000 and $22,000;

•  “Monetizing” the credit so it is available at time of closing; and

•  Allowing the credit to be used in conjunction with mortgages financed by state or local bonds.

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