The senate started piling on amendments to a proposed housing bill that, if passed, would add some interesting incentives to buy. Of particular note is a proposed $7000 tax credit (not a deduction--a credit!) to anyone buying a foreclosed home (see my post: "I want to buy a foreclosure.") A credit that size would indeed compensate for some of the risks involved in buying a bank owned property (see beginning of series here.)
For people in a 30ish% marginal percent tax bracket, a $7000 credit is equivalent to about $23,000 of income tax-free--that is 23,333* 30% tax rate = $7000 in your pocket!
Not interested in a foreclosure? That's okay--Senator Ben Cardin wants to give a temporary $7000 credit to all first time home buyers--similar to the measure that has spurred a lot of first time buyers in DC for years--as well. (TBD on whether first time buyers who purchase a foreclosure get $14,000.)
We'll have to keep an eye on this to see if it passes through as-is, but if I were on the fence about buying, $7000 is a nice chunk of change for the government to chip in.
Update 04/08/08: The House plan is proposing an $8000 first time buyer credit, and is good for the next 12 months. The credit would need to be repaid after 15 years. Stay tuned -- this is destined for committee before being passed. So far, this is just a bill, not a law...remember the classic ditty: I'm just a bill...
Read more: Figure out your marginal tax rate, that is, the tax paid on the last dollar earned.
Read more: Risk of buying a foreclosure series starts here.
Read more: Tax Tips for Homebuyers
Read more: Local Classes for First Time Homebuyers