The Senate recently voted this week to replace the $7,500 tax credit for first-time home buyers and builders who earned less than $150,000 with a $15,000 break for all income groups as part of theÂ economic stimulus package.Â Itâ€™s an effort by senators to effectively encouraging purchases by higher-income households with a reduced risk of default.Â
Unlike the current law, the $35.5 billion provision wouldnâ€™t be restricted to first-time homebuyers or have to paid back over. Â It also would end homebuyersâ€™ ability to claim the full credit if it exceeds the amount they owe in taxes.
Â The effect would be to wipe out the $15,000 income tax a family of four earning about $122,000 would otherwise owe this year if they bought a house. A family earning half that amount would get about $2,300 less in tax benefits for buying a home than they would under current law.
Lower-income people whose taxes over two years donâ€™t total $15,000 wonâ€™t get the full benefit and in many cases would get a better deal under current law, which requires the government to send a check for the difference between taxes paid and the $7,500 credit.
Under existing law, the $7,500 has to be repaid. The Senate bill wouldnâ€™t require the $15,000 credit to be repaid. In its version of the economic stimulus bill, the House agreed only to waive the repayment requirements, though it left the refundable credit at $7,500 and preserved income limits for eligible users.