Isakson Compromises on Homebuyer Tax Credit

The leading advocate in the Senate for extending the homebuyer tax credit, Senator Johnny Isakson, R-Ga., announced yesterday he will introduce an amendment for a six month rather than 12 month extension of the credit and would keep the maximum credit at $8,000 per rather than increasing it to $15,000.

However, Isakson will still try to expand the credit to include all buyers, not just first-time buyers, and his amendment would raise the income limits to qualify for the credit to $150,000 for an individual or $300,000 for a couple.

"The current home buyer tax credit is set to expire on November 30, and we are approaching the worst three months of the year for the housing market. It is imperative that we retain the momentum we have gained as a result of the current credit and go into the spring market with the increased consumer confidence necessary for establishing a viable market," Isakson said.

Isakson said he believes the real housing recession is not with first-time home buyers but in the "trade-in" or "move-up" market in which citizens are putting off purchasing their next home.

Under Isakson's amendment, for purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax returns. Home buyers would not have to repay the credit, provided the home remains their principal residence for 36 months after the purchase date. However, the 36 month recapture provision would not apply in the case of a member of the Armed Forces on active duty who moves pursuant to a military order and incident to a permanent change of station.

The Joint Committee on Taxation has scored the amendment at $16.7 billion over five years.

"Expanding the tax credit has a cost, and it is a significant amount of money," Isakson said. "However, it is less than 3 percent of the amount of the stimulus, and we know from what has happened in the last nine months that the home buyer tax credit works," Isakson said.