Senators Look to Expand Home Buyer Tax Credit

Oct. 29, 2009 -- If plummeting home prices and low interest rates have not brought a home buyer into the market, lawmakers are hoping a $10 billion expansion of a temporary tax credit will.

With a popular first-time home buyer's tax credit set to expire Nov. 30, it would be the third incarnation of the incentive.

In 2008, Congress passed a $7,500 tax credit first-time buyers. But it had to be paid back over time.

The program was expanded to an $8,000 credit as part of the stimulus in early 2009, and the money no longer had to be paid back.

Now, senators want to extend the current $8,000 credit for first-time buyers as well as open it up to existing home owners who have lived in their current home for five years or more, making them eligible for a $6,500 credit.

But despite the credit's past two reinventions, don't look for another expansion after this one.

"This is the last extension of the home buyer's tax credit," said Sen. Johnny Isakson, R-Ga. "Tax credits like this only work by creating the sense of urgency to take advantage of them and to bring the market back. So the American people and the home buyers and the home sellers have an opportunity over the next seven months to take advantage of and it's a once-in-a-lifetime credit to help us bring the housing market back to some sense of vitality."

The senators argued that expanding the tax credit beyond first-time buyers will enable more money to seep into the economy.

"The move-up home buyer is more likely to buy furniture, put on a porch, build a garage," said Senate Banking Committee Chairman Chris Dodd, D-Conn. "There is more of an economic impact ripple effect in the move-up market than there is the first-time home buyer market."

Here's how their expansion would work: