How does the current Tax Credit work?

The current legislation grants a one-time credit of 10 percent of the home’s purchase price up to a maximum of $8000 to first time homebuyers or those buyers who have not owned a house in the last three years.  Homebuyers can chose to claim the credit either retroactively on their 2008 return or on their 2009 obligation.  If the buyer does not owe enough taxes to cover the credit the balance will be refunded to them in cash.

How would the new Tax Credit work?

The new legislation is currently in front of the House Ways and Means Committee, the current First Time Home Buyer Tax Credit is very popular and could be extended beyond its current expiration date and greatly expanded. Congressman Coble’s is introducing the new legislation which would remove both the income restriction and the requirement that the home be a first-time purchase.

Foreclosures and short sales reflect 31% of sales in July. Distressed property sales have pushed prices lower, year over year, attracting buyers not sidelined by unemployment or tight credit conditions.

WSJ – Full Article