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Attention Home Buyers: Tax Credit Could Go Up!

To cope with the gloomy real estate market, lawmakers and businesses call out for an increase in tax credit for first-time home buyers. Right now, the tax credit is maxed at $8,000 and is expiring this coming fall. Some business groups suggest the tax credit be increased to $15,000 for first-time home buyers.

According to the National Association of Realtors (NAR), 40% of home purchases consist of first-time home buyers, a 5% increase than the historical average. The tax credit, originally part of the economic stimulus package, was introduced last July 2008 and was later expanded in February. According to some economists, the tax benefit is crucial to stimulate home buying and to stabilize prices.

The proposal to increase the tax credit includes the following:

  1. A Senate Bill, introduced by Sen. Johnny Isakson, that will extend the tax credit to $15,000 for home buyers
  2. A House Bill introduced by Rep. Kenny Marchant that will keep the $8,000 tax credit until 2010 and $3,000 credit to homeowners who would like to refinance
  3. Another House Bill that will extend the tax credit to all homebuyers until 2010, as introduced by Rep. Eddie Bernice Johnson

Bernard Bauhmol, an Economic Outlook Group economist, is confident that the Congress will approve the proposal because “it’s important that housing come back” despite the fact that raising the credit will result to reduction of taxes. Meanwhile, the Business Roundtable, a group of CEOs of big companies urges the Congress to increase the tax credit to up to $15,000 and make all home buyers eligible. Realogy CEO Richard Smith thinks that the real issues are how to stimulate the “move-up market” and how to pay for it.

At the moment, the policy on tax credit does not apply to singles who earn above $95,000 per annum and couples who earn above $170,000. There are some business leaders who want these income caps removed to increase the number of eligible individuals. At the end of the day, one thing’s for sure – if these proposals were approved, more people will definitely take advantage of the expanded tax credit.

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