Thanks to Brian Call of Rubicon Motgage Advisors LLC, here are some answers to your questions about the Senate Stimulus Bill.
There have been several questions about the proposed $15,000 home buyer tax credit that is in the Senate version of the economic stimulus bill. It is important to remember that the proposed credit is far from a done deal. If it passes, it will have to be reconciled with the House version of the stimulus bill, which modifies an existing $7,500 home buyer credit, repealing a provision that requires buyers to pay it back.
There are some big differences between those two versions. The Senate version is nonrefundable, meaning you can only receive the credit if you owe federal income taxes. The existing credit is refundable, meaning you get a check from the government even if you do not owe income tax. And the current credit applies to first-time home buyers, defined as anyone who has not bought a house in three years. The Senate version is open to existing homeowners.
Here are some more
Frequently Asked Questions:
If I bought a home and used the $7,500 home buyer tax credit, can I retroactively receive $15,000 credit if it becomes law? No.
Are there any income restrictions on the tax credit? The Senate version currently has no income limits. The current $7,500 tax credit phases out on buyers with incomes exceeding $75,000 for individuals and $150,000 for married couples.
When will the new tax credit go into effect? The Senate version would take effect when the bill is signed by the President into law, and it would last for one year.
Can I take the tax credit this year? Yes. The Senate proposal would allow buyers, even those who purchase in 2009, to claim the credit on their 2008 taxes.
The proposed tax credit is nonrefundable. What does that mean? You can only receive the credit to the extent that you owe federal income taxes. The Senate proposal would give home buyers two years to claim the credit, so buyers could claim a $7,500 credit in 2009 and a $7,500 credit in 2010. A family of four that makes less than $82,000, for example, could have a tax liability of less than $7,500 and they would not receive the full value of the credit.
Are there any repayment requirements on the tax credit? No. The Senate proposal does not require the credit to be paid back. The House proposal eliminates a 15-year repayment provision on the existing $7,500 tax credit.
If I am eligible for the current $7,500 credit, am I also eligible for the $15,000 credit? While the $15,000 credit has fewer restrictions than the existing credit, there is one big difference: because the credit is nonrefundable, if you have a low federal income tax liability, you could end up receiving more money with the current credit than the larger, proposed credit.
Are there any increased down payment requirements on the proposed tax credit? No. A separate measure has been introduced in the House that would expand the tax credit to $15,000 but would require a 5% down payment on mortgages. The Federal Housing Administration currently requires a minimum 3.5% down payment.
Can I use the tax credit to buy a second home? No.
How long do I have to live in my home after I purchase it with the tax credit? The Senate version requires buyers to pay back the credit if they sell the house less than two years after they buy it.
If you are looking for more information please contact Eric or Sharla at 952.470.2575 or Brian Call at briancall@rubiconmortgagellc.com.
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