Not So Much Of a Stimulus For Some D.C. Home Buyers
Senate's Tax Credit May Exclude First-Timers
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Tuesday, February 10, 2009
A tax credit designed to jump-start the housing market may end up short-changing first-time D.C. home buyers.
That credit is tucked into the Senate version of the stimulus bill under debate in Congress.
The measure would provide a credit of up to $15,000 to buyers who are purchasing a primary residence. But first-time buyers in the District who can tap into the long-existing $5,000 tax credit for purchases in the city appear to be shut out of the deal.
"That seems odd and unfair," said Linda Goold, tax counsel of the National Association of Realtors. "Somebody has not thought this through all the way."
Both houses of Congress have been looking to stimulate the housing market to lessen the damage caused by the foreclosure crisis. Tax credits have gained support from both parties as one way to motivate would-be buyers.
But it's unclear how some of these proposed tax credits would interact with the D.C. provision, in place since 1997 as a way to encourage people to invest in the city by providing a $5,000 federal tax credit.
That credit wasn't a focus in July, when Congress passed a tax credit of up to $7,500 aimed at first-time buyers.
But the $7,500 credit failed to energize potential buyers, mostly because it had to be paid back, making it essentially an interest-free loan.
"Consumers viewed it as additional debt they had to carry, and the credit had very little impact," said Lawrence Yun, chief economist of the Realtors group. "It was a disappointment."
To make the tax credit more appealing, the recently passed House version of the stimulus bill gutted the repayment requirement. The Senate version, scheduled for a vote this week, did the same, then went further. It raised the tax credit to $15,000 and extended it to all home buyers, not just first-timers.
To prevent double-dipping, D.C. buyers have not been allowed to take advantage of both credits. But so far, they have come out ahead. Even though the $5,000 D.C. credit is smaller than the existing $7,500 credit, it doesn't need to be paid back.
But these buyers now stand to lose out -- to the tune of $10,000 -- if Congress adopts the $15,000 tax credit proposed by Sen. Johnny Isakson (R-Ga.).
