The Housing Bill - the tax credit that is NOT a credit - a major flaw in the bill ?

By
Real Estate Agent with The Somers Team at KW Philadelphia

I just read this article .  It includes the following:

-- First-time homebuyers get a tax credit of up to $7,500. Comments Scharin of Thomson Reuters: "This provision contains some catches: The credit is more of an interest-free loan than a complete giveaway; in general, taxpayers will have to pay back the credit they claim over 15 years. Also income limitations restrict eligibility."

WHAT ???                  

1.   Why in the world would income restrict elgibility ????  Why bother putting a tax credit to begin with ?  What are the income restrictions ?  What is the difference between a lower income house purchasor and a higher income house purchasor ?  THEY ARE BOTH HOME BUYERS !  It seems like discrimination to a degree to me.

2.  Even then, it is not a credit at all to even the lower income purchasors !!!  An interest free loan to be paid back over 15 years ????  WHAT ???  Why are they throwing money at other parts of the housing bill and for the one that is most logical, providing an incentive to people to purchase homes, is not really providing an incentive at all ?

Thus, there is no tax credit to high income homebuyers and for the tax credit that is available for lower income homebuyers, it has to be paid back over 15 years !!!

This is a disgrace...

What do you think ?   Am I off my rocker or what ?

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Rainmaker
493,595
COMPASS PALM SPRINGS | Stewart Penn
COMPASS - Palm Springs, CA
COMPASS Palm Springs - Broker Associate

Quite frankly - lower income earners generally receive tax refunds - so how would the tax credit help them if they're already not having to pay in on their taxes.

Am I missing something?

Jul 26, 2008 12:56 PM #1
Rainmaker
341,571
Eric Reid
Renaissance Realty Group of Keller Williams Atlanta Partners - Lawrenceville, GA

It is all about making sure the bill reads well in to the general public it does not have to be "smart" just exciting.

Jul 26, 2008 01:03 PM #2
Rainmaker
535,099
Kenneth Cole
Weichert Realtors Appleseed Group, 2043 Richmond Ave. S.I.N.Y. 10314. office phone 718-698-9797, Appleseedhomes.com... - Staten Island, NY
NYS Licensed Real Estate Salesperson

You can see through this sham.  You are smart beyond your years.  This is another BIG waste and you and I will be paying for it.  No one helped me with MY mortgage.  And are  Freddie and  Fanie both owned by the public?  Who do they rate our help?

Jul 26, 2008 01:25 PM #3
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The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
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Stewart, Eric and Ken,

It sounds like we are all on the same page.  What is befuddling to me is that I am suprised that no one is talking about this.  I had to search many pages to find the 2 catches on the tax credit.  I would think eventually someone (besdides myself) will rant about this.  To stimulate the housing market, why restrict any type of purchasor ?  And then why do it this way to have an interest free loan ?  Is a bunch of nonsense !

I still am upset after a good nights sleep !

 

Jul 27, 2008 12:00 AM #4
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Jim Crawford
Crye-Leike REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

I read this too.  It is appalling that the credit is really a loan that has to be paid back.

Jul 27, 2008 03:47 AM #5
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The Somers Team
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Jim,

I thought you would agree with me.  It is appalling to say the least.  And for the "credit" to be phased out based on income, to me is absurd.

Philadelphia Real Estate

Jul 27, 2008 04:24 AM #6
Rainer
70,478
Jan Wood
None - Gallatin, TN

Chris & Stephanie: Here’s how it the “carrot” works according to USA Today…

“First-time home buyers who purchase a primary residence between April 9, 2008, and July 1, 2009, will be eligible for a tax credit of $7,500 or 10% of the purchase price, whichever is less.

On the surface, this looks like a pretty good deal. A tax credit is a dollar-for-dollar reduction in your tax bill, which makes it more valuable than a deduction. And this tax credit is refundable, which means you'll qualify even if your federal tax bill is less than $7,500, says Bob Scharin, senior tax analyst for Thomson Reuters. For example, a first-time home buyer who owes the IRS $2,000 would receive a refund of $5,500.

But this provision includes a lot of caveats, including:

•You'll have to pay it back. While this break has been labeled a tax credit, it's really an interest-free loan. Home buyers who claim the credit will be required to pay it back in equal installments over 15 years, starting in the second year after the home is purchased. If you buy a house this year and claim a $7,500 credit on your 2008 tax return, you'll have to pay an additional $500 a year in taxes for 15 years, starting in 2010.

If you sell your house before the 15 years has elapsed, you'll have to repay the entire balance, unless you sell at a loss.

•If your income exceeds certain thresholds, you're ineligible for the credit. The tax credit phases out for single taxpayers with adjusted gross income of $75,000 to $95,000. For married couples who file jointly, the phaseout is $150,000 to $170,000.”

http://www.usatoday.com/money/perfi/columnist/block/2008-07-28-housing-bill-tax-breaks_N.htm

Jul 29, 2008 12:26 PM #7
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The Somers Team
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Jan,

Thanks for the update !  That income restriction is a joke !  What is the difference between a first time home purchasor couple who make over $200K versus one who makes under ?  THEY ARE BOTH HOMEBUYERS STIMULATING THE ECONOMY AND THE HOUSING MARKET !

Is absurd !

Philadelphia Real Estate

Jul 29, 2008 12:37 PM #8
Rainer
70,478
Jan Wood
None - Gallatin, TN

Not many people will be able to take advantage of a tax credit anyway because they can't get a loan.  They need to do something to ease up the lending standards first.

Jul 29, 2008 01:18 PM #9
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The Somers Team
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Jan,

Good point regarding the lending standards.  Still, FHA is pretty easy here for first time homebuyers. 

Philadelphia Real Estate

Jul 29, 2008 11:09 PM #10
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Jim Crawford
Crye-Leike REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

I also found out that if you sell a home or refinance the home with in 5 years there are tax penalties.  This bill is a peice of junk!

Jul 30, 2008 01:14 AM #11
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