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$15,000 Homebuyer’s Tax Credit is Back on the Table

Written by Nickel - 28 Comments

Remember back in February when I first talked about the $15,000 homebuyer tax credit? Well… It seems that Senator Johnny Isakson (R-GA), the original sponsor of that bill, is back at it again.

In addition to increasing the maximum tax credit from $8,000 to $15,000 (with a max of 10% of the home’s purchase), Isakson’s proposal would also make the credit available to all purchasers of a primary residence, not just first-time homebuyers. The income caps ($75k for individuals, $150k for couples) would also be eliminated.

As a former Realtor himself, Isakson has argued that “we don’t have a recession in first-time home buyers. We have a recession in the move-up market.” Thus, he believes that it’s time to expand the credit beyond just first-time homebuyers.

Interestingly, Isakson’s bill is backed by a bipartisan group of co-sponsors, including Lamar Alexander (R-TN), Jim Bunning (R-KY), Chris Dodd (D-CT), John Ensign (R-NV), Joe Lieberman (I-CT), Lisa Murkowski (R-AK), James Risch (R-ID), and David Vitter (R-LA). Not surprisingly, he has also picked up endorsements from a couple of real estate industry groups.

While I suspect that this program would actually work from the standpoint of getting people to buy/sell houses, at least in the short term, I’m not a big fan of throwing another $32B at the problem. What do you think?

Published on June 23rd, 2009 - 28 Comments
Filed under: Real Estate, Taxes

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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28 Responses to “$15,000 Homebuyer’s Tax Credit is Back on the Table”

  1. 1
    Walt Says:

    Why stop there? How about we just give a free house to everybody who doesn’t have one? Housing crisis solved! And if you actually bought a house and make your mortgage payments on time…well, you should have known better.

  2. 2
    Jason Unger Says:

    As a taxpayer, I don’t know where all this money is coming from.

    As a first time homebuyer who already got the $8,000 credit, if the government is going to give away more money, I’m not going to turn it down.

  3. 3
    ObliviousInvestor Says:

    Couldn’t possibly be more against this idea. (Though to be honest, I was against the one for first-time home buyers, and I’m against the deductibility of home mortgage interest as well.)

    I just don’t see a valid reason to subsidize real estate spending over other spending. Or, to use some terms from econ courses in college, I don’t see any positive externalities that need to be internalized.

  4. 4
    Kira Says:

    I was not eligible for the $8,000 tax credit (because I technically still own another home), but would be for the $15,000 under this bill. My previous home is rented because I moved out of the area and could not sell it for what I bought it for.

    I have to say that for all of the government bailouts I’ve seen, I’m more in favor of giving back to the people than buying up “equity” in something like Fannie Mae, Citibank, or Bank of America. I just don’t think trickle down economics works like it used to, and capitalism needs to be left alone to let bad companies fail.

    My $15,000, if passed, will go toward the mortgage debt on the house I now owe more on than it’s worth. How much more? Not the 20% “national average”. Here in Phoenix, it’s more like 50%.
    That 15K will go toward not making me another bank “loss” that they will write up as $200K, make the government buy “interest” in, and all the money goes up in smoke.

    Yup. Better Joe Blow than Citibank.
    What has Citi done for you lately?

  5. 5
    thebaglady Says:

    Generational theft at its finest. You can be sure if this passes that money would be borrowed from the future.

  6. 6
    Wise Money Matters Says:

    Here’s my evil scheme to take over the world (or at least make a few extra bucks):

    I assume this bill will have some sort of end date. So let’s say that the credit applies to any homes purchased between now and December 31, 2010 (though any date works).

    I’m also assuming you can only do this once (i.e. I can’t go home swapping every month for a few years and get multiple tax credits).

    First I would buy another home as soon as this bill was enacted but use it as my primary residence. Then I basically get $15K off the price of my new home. Then I would rent out my current home for a while (this general idea would also work by selling the current home for the new one rather than renting it out).

    I would put both of my houses up for sale on November 1, 2010 at a premium. Housing prices should be up anyways due to this bill but people will be scrambling to get their tax credit just before December 31, 2010 and this will create an additional artificial increase in housing prices.

    Then I would move into a rental home for 6ish months and purchase a new home immediately following the new housing crash. Thus I would get the original 15K plus any bonuses from selling high and buying low. Because once the bill ends, the housing market WILL fall again.

  7. 7
    kev Says:

    I don’t think it’s a great idea, but at least it is a little more fair. I hate the 8,000 dollar first time home buyer credit b/c I feel it gives new buyers an unfair leverage against existing home owners. Those of us who are helping the system limp along by paying our mortgages shouldn’t necessarily be rewarded, but we definitely shouldn’t be punished – especially with our own tax dollars.

    I wonder if this discussion is a mute point though. I would be very surprised if it actually came to be. If it does I will give it great consideration though and I don’t even want to move. Historic low rates, fire sale home prices, and up to 15,000.00 worth of free equity! Where do I sign?

  8. 8
    Matt @ StupidCents Says:

    Free equity? Think again! Can you imagine how the home prices will be affected once you have a wave of new potential buyers that hit the market? I would imagine house prices would see some sort of increase, maybe not the full $15,000; I suppose it depends on the area.

    Stupidly Yours,

    Matt

  9. 9
    Kirk Kinder Says:

    Wise Money Matters is spot on. This is government interference in the free markets that will have unintended consequences by creating a short term floor in prices. Once the program ends, then the floor falls out.

    Just let the markets work. Already the foreclosed inventory is being sold in Cali, Phoenix, Florida, and Vegas. It takes time, but this will work itself out. Eventually, move up buyers will be found, but the government helped to this housing mess to begin with by creating Fannie/Freddie and allowing mortgage interest to be deductible. These silly tax credits only distort the market further.

  10. 10
    Michelle Says:

    I’m with Kev on this: “Those of us who are helping the system limp along by paying our mortgages shouldn’t necessarily be rewarded, but we definitely shouldn’t be punished – especially with our own tax dollars.” Where is my equity-bump giveaway? I’d love the government to hand me $15K to throw at my mortgage’s principle if only it didn’t come out of my taxes paid.

  11. 11
    MyMeans Says:

    I would have to agree that giving more money away isn’t going to help the situation. I purchased my home back in 2007 and haven’t gotten a dime and I’m still making payments and saving money for my future. If I made bad decisions, I would expect to suffer from those bad decisions and have to clean up my own mess.

  12. 12
    Autodidact Says:

    I like the idea to help balance the mistakes of the past that are hurting us all, but don’t think it should be an outright gift. $7500 should be a straight rebate, and the other $7500 should be available, if desired, as a very low-interest loan.

  13. 13
    Kevin D. Says:

    Well, I’m rooting for it. While I would like to see congress to eliminate all of this superfluos spending, I just bought a house and would like the $15k tax credit.

  14. 14
    Michael P. Says:

    The Republican in me says that removing the income restriction is an excellent idea while the common sense in me says this is a terrible idea!

  15. 15
    Britaini Says:

    While I agree that our government spending is outrageous, it was nice to be given at least that $8000 tax credit when my husband and I purchased our first home in March. We used it to pay off bills or pay them down and buy what we needed for the new house. People just need to use their heads when they are given the money and use it WISELY. Our mortgage was affordable before but with fewer bills, it is even easier to make the payments. It is nice to see some of my tax money personally helping me and my family.

  16. 16
    retireby35 Says:

    Darn it, I wish I bought my first house when this $15,000 tax credit comes out… could definitely use the extra income. I wonder who is paying for it.

  17. 17
    bothhandsopen Says:

    i got the $8000 in april and then shorted the bank that gave me the mortgage -then took out a home equity loan and shorted more… and i wont pay either loan which will help my short interest since they are losing money loaning out to deadbeats!

    :)

  18. 18
    Jack Says:

    I am up for it, since I am in the market for a new house. I would’nt qualify for the original $8k due to income restrictions, so I think it is just fair to provide the credit for all buyers. Any idea when this bill will be voted in the house?

  19. 19
    Eddie Says:

    How about this, everyone with a home they can’t afford—tough loss, you should have gotten a loan you could afford and stayed away from the ARMs.

    For all the banks going under—let them, it’s called capitalism.

    Then, maybe we won’t hear this rediculous “too big to fail” stuff, prices should come down, and maybe the value of a dollar might actually go up.

    If not and the $15K gets passed, maybe I’ll go the Wise Money Matters route above, but of course I’ll be buying my first home as I knew I couldn’t afford a house during the bubble market.

  20. 20
    Rob Says:

    This works for my family at this time. My wife and I are simple middle class working Americans with four children who have been renting for last three years (which apparently re-qualifies us as first time home owners again) waiting for right time to buy. We cannot afford a mansion, just want something comfortable for my family of six. We have found a builder willing to build us a house for about $220,000 that will accomodate all of us nicely for years to come.

    And yes, I am not some chump always looking for a govt handout.I am a WHITE, CONSERVATIVE, EVANGELICAL who typically wants govt to leave me alone. But this is the first time in my 40-year old life that I can actually say “thank you U.S. govt for a little shot in the arm”

    We don’t make a lot of money but we have been trying to scrimp and save like everyone else and this tax credit plan will give us a HUGE lift in making our “American dream” a reality (whatever that is)….

    To all you naysayers out there, put yourself in the position of folks like me who are not looking to “move up” in the market, but rather we are just looking to “move in!” This bill will allow me to buy a home in my area and thus generate some good paying work for local contractors as they put my house up. This is good thing at the right time for our economy.

  21. 21
    Yvonne Says:

    The banks are a good part of the blame for the housing decline. Banks were bailed out! Banks in our area (NM) are busy, busy, BUSY because of low interest rates (LOTS OF REFI). So, what’s the problem with tax credit for home buyers? I just wish the original $15000 proposed earlier this year that actually passed the Senate and for ALL HOME BUYERS would have kicked in instead of what’s in place now. I missed the tax credit by 5 1/2 months. And as as Realtor, I am inclined to say we need something to intice home buyers.

  22. 22
    Brad Says:

    This is a GREAT idea!!!! I’m all for it

  23. 23
    Bonnie Says:

    I am looking for a no fee, 0% balance transfer credit card.
    We used to be able to find 12-15 mo. zero percent balance transfer cards, with no transfer fees, now they seem to be non-existent. Too bad. They were a great way to pay down cc debt. Any suggestions? Are any still out there for even a year? Thanks for the help.

  24. 24
    Jackie Says:

    I think this constant sweetening of the pot is actually harming the housing market. How many people who would have bought a home in 2009 are now going to spend the next 5 months sitting on their hands waiting to see if the pot is going to be sweetened? And when it does go up to $15,000, how many people won’t believe that this is the final deal and will sit on their hands for another year waiting for a better offer?

    And didn’t we get into this mess by people buying houses they couldn’t afford with 100% financing and no “skin in the game”. How is this any different? People who couldn’t manage to save even a minimal downpayment are now being thrown the money in the form of a free government handout. Of course, people who did save a downpayment and would have bought a home anyway are also being thrown the money. What a waste!

    The government needs to just let the market correct itself naturally. It might take a little longer, but in the end, it will be a true stabilization, not a phony one driven by an influx of buyers waving a wad of government-supplied cash that only serves to artificially raise prices that will fall again once the free-money disappears.

  25. 25
    C. Charin Says:

    I strongly believe the $15,000 would make a difference in our economy and would fuel the 2009 Fall and Winter markets nationwide. Anyone who actually can qualify for a home now in this market is creating a nice base to stabilize neighborhoods. There are entire neighborhoods falling apart from all the stated income lending that went on 2 years ago many of which came from builder owned mortgage companies. It is time to replace all the bad loans in the neighborhood with people who can actually afford their mortgage and those who can’t afford their mortgage due to true hardships need their loans modified by their current lender so that it makes sense for them to stay and ride it out.

  26. 26
    OPTIMIST Says:

    I think that most of those who disagree have been born with atleast some sort of spoon in their mouths. I don’t own a home and am a small business owner, (I am the only employee) and only make what I can physically generate. I was audited a few years ago, lost the audit and had to pay the government back more than a third of my income plus penalties and interest, not to mention the taxes I had already paid. I grossed only about $35,000. I would love to be able to purchase a home, I pay rent, but who can save a large downpayment with this bully around? I would like my money to benefit me. They should audit those who don’t live here who’ve gotten help from US. (dual meaning!)

  27. 27
    Gigi Says:

    We’re seriously considering building a new home– and a $15,000 tax credit would certainly be a huge incentive to go ahead and do it! Our current home’s value is down– so we wouldn’t be able to sell it for as much as we could have several years ago, so a tax credit would help to off-set this loss in value…

    Any ideas on how long before we’ll know if this has any chance of passing? We would be looking to build either later this year or early next year, and would hate to go ahead with it and just barely miss this credit by jumping the gun…

  28. 28
    maria Says:

    Does anyone know if this proposal is still being considered? What’s the latest developments? I’m deciding to buy a house now or should i wait it out? thanks…

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