One of the few things that helped to prop up an anemic housing market was the homebuyer tax credit from the government. The way it worked was that people who bought homes could get some fast cash from Uncle Sam as a gift for doing their part in stimulating recovery, under certain conditions. A lot of people are going to end up paying the tax credit back. A lot of the credits were low interest loans, not refunds.
Washington offers a little quick cash
The recession took a huge toll on many industries. One of the hardest hit was the housing industry. Available home loans and capital dried up, prices and value went into freefall and foreclosures skyrocketed. Plans for a way to stimulate home sales were put into effect. The flagship was a homebuyer tax credit. In 2008, the first year of the program, at least $7,500 or 10 percent of the purchase price could be deducted for buying a home. The deduction was changed to a refund in 2009, when the program was extended. However, there is a catch, according to CNN. The catch is that the deduction was not really a deduction or a credit, but a deferment. Basically, it was a loan.
Due to the IRS in 15 years
Those who claimed the tax credit have 15 years to pay it back. There are 950,000 people who owe for the low cost loans, according to the Internal Revenue Service. However, the IRS does not know exactly who owes and who doesn’t and is investigating inaccurate and fraudulent paperwork. Among the discrepancies there were 1,326 people who filed for the tax credit who are actually dead.
Debate stimulated by stimulus
Since stimulus programs were initially proposed, there has been questions over what good the programs would do. Rightly so; the mortgage modification program hasn’t been very successful, and the bonus that 950,000 or more people believed they were getting for a home purchase has to be paid back. If people had known the tax credit had to be paid back, would they have bought homes anyway?
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