The Senate will vote tomorrow on the Economic Stimulus Bill which includes a provision giving home buyers a $15,000 tax credit. The provision is designed to get qualified home buyers off the fence, start purchasing homes and reduce the large quantity of home inventory across the country.
The Senate bill has significant differences from the House bill, which will have to be addressed if the Senate bill passes.
The Home Buyer Tax Credit theory: by reducing the backlog of home inventory, home prices will stop their free fall and the number of foreclosures will be reduced, thus reducing losses for banks holding mortgage backed securities, improving the credit markets and stabilizing the economy.
The Basics: The bill provides a tax credit for 10% of the purchase price of a primary residence up to $15,000. Unlike the House bill, the Senate bill is available to all buyers of primary residences. It does not have an income limit. The credit is non-refundable, meaning home buyers can only benefit from the credit if they owe Federal income tax in the year of purchase.
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