Proposed Legislation Would Expand Tax Credit

Senator Johnny Isakson has introduced new legislation that would significantly expand the existing first-time home buyer tax credit. Isakson is a Republican from Georgia, but he was joined by a bi-partisan group of co-sponsors, including Senators Chris Dodd, a Democrat, and Joe Lieberman, an Independent.

Here are the key provisions of the bill:

• The maximum amount of the credit would be increased from $8,000 to $15,000
• The credit would be available to all home buyers, not just first timers
• The current $75,000 and $150,000 income limit for individuals and couples would be eliminated
• The credit would be extended one year from the date of passage
• Buyers could claim the credit on 2009 tax return, even if the purchase was in 2010

Another group of senators, including Harry Reid and John Ensign, are pushing for a six month extension of the existing tax credit for first-time buyers.

As for support for extending the credit from the White House, Michael Cohn of WebCPA.com writes that spokesman Robert Gibbs has indicated that the administration is the administration’s economic team was evaluating the impact on new home sales and would make a recommendation to the president.

The likelihood of the bill's passage is unclear, but it's already had an impact on the market. At least one potential buyer has told me that he's "crossing his fingers" that it will pass - which could translate to buyers adopting a "wait and see" attitude in the short term. If the bill does pass in anything like it's current form, it will eventually add incredible motivation to buyers and increase demand for homes.