Conflicting description of the Stimulus 15k Tax Credit, 7.5k Tax Break, What is it then?

[Anonymous]

Hi All,

I am confused on the description of this stimulus plan.  Per some articles it states

"The proposal would allow a tax credit of 10 percent of the value of new or existing residences, up to a $15,000 limit. Current law provides for a $7,500 tax break but only for first-time homebuyers"

I understand 7.5k is tax break, basically CASH if you meet criteria. (subject to 500 p/yr payback for 15years or proposed per stimulus no payback/free) is it taxable income?

1- Now the 15K,  is it in addition if you meet both criteria?

2- is this CASH or "Tax Credit" basically a 15K tax credit where it increases standard deduction, does it take 15K off the top of taxable income?...  what is it? 

The definition of "Tax Credit" and "Tax Break" is confusing?

There is a big difference between credit and break. 

What is it then???????

Message Edited by Doomkopft on 02-05-2009 08:57 AM

[Anonymous]

I think you are totally confused. LOL

The old law stated that you could get 10% of the purchase price - up to $7,500 as a tax credit. However, even though it was worded as a tax credit, we've all come to the conclusion it really should have been called an interest free loan, since you had to pay it back.  

The new plan has upped the tax credit to 10% of the purchase price - up to $15,000 as a tax credit. This time it is a REAL tax credit that will not need to be paid back, unlike the first version listed above. 

So, if you buy a home between January 1, 2009 - December 31, 2009 and you meet the income criteria, you may take the 10% (of the purchase price of the home, up to $15,000 max credit) on your 2009 taxes.  For those that purchase early in the year -- say you closed yesterday and you want the credit...they can file an amended tax return if they filed their taxes already so that they can get the credit this year. Most will wait until 2009 taxes and claim it then. 

It is a tax credit, as in it is dollar for dollar off the top.  If you owed $5,000 in taxes, but you were eligible for the full $15,000 tax credit, you'd wind up getting a $10,000 tax refund.  Make sense? 

Message Edited by UpUpUp on 02-05-2009 12:26 PM

[Anonymous]

I'm confused on the Isakson admendment myself.  From his web site he says:

"The amendment would allow taxpayers to claim the credit on their 2008 income tax return. It also seeks to prevent misuse by only allowing purchases of a principal residence and by recapturing the credit if the home is sold within two years of purchase. The amendment would sunset the current $7,500 housing tax credit on the date of enactment." http://isakson.senate.gov/press/2009/020409housing.htm

The amendment's language does indeed sunset the old provision on date of enactment but it also amends the date of qualification from January 1, 2009 through December 31, 2009.  Which is it?  I think the Jan 1 through Dec 31 but what then does the sunset provision on the old credit mean?  Does it give a taxpayer the option of using the old "credit" if they wanted to just for legal reasons or something?

Text from amendment:

``SEC. 25E. CREDIT FOR CERTAIN HOME PURCHASES.

    ``(a) Allowance of Credit.--

    ``(1) IN GENERAL.--In the case of an individual who is a purchaser of a qualified principal residence during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter an amount equal to 10 percent of the purchase price of the residence.

    ``(2) DOLLAR LIMITATION.--The amount of the credit allowed under paragraph (1) shall not exceed $15,000.

    ``(3) ALLOCATION OF CREDIT AMOUNT.--At the election of the taxpayer, the amount of the credit allowed under paragraph (1) (after application of paragraph (2)) may be equally divided among the 2 taxable years beginning with the taxable year in which the purchase of the qualified principal residence is made.

    ``(b) Limitations.--  

``(1) DATE OF PURCHASE.--The credit allowed under subsection (a) shall be allowed only with respect to purchases made--

    ``(A) after December 31, 2008, and

    ``(B) before January 1, 2010.

----

 ``Sec..25E..Credit for certain home purchases.''.

    (c) Sunset of Current First-Time Homebuyer Credit.--

    (1) IN GENERAL.--Subsection (h) of section 36 is amended by striking ``July 1, 2009'' and inserting ``the date of the enactment of the American Recovery and Reinvestment Tax Act of 2009''.

    (2) ELECTION TO TREAT PURCHASE IN PRIOR YEAR.--Subsection (g) of section 36 is amended by striking ``July 1, 2009'' and inserting ``the date of the enactment of the American Recovery and Reinvestment Tax Act of 2009''.

    (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2008.