Under the proposed legislation, first-time home buyers or those who haven't owned a home in the last three years would continue to receive the $8,000 tax credit that's been in place since January 2009. The tax credit has been a major boon to existing home sales, spurring five gains in the past six months, according to the National Association of Realtors.

In an effort to stimulate even wider sales, the legislation would also extend a $6,500 credit to buyers who have owned their current home for at least five years. Both credits would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000. The credit would be available for principal (read: not vacation) homes that cost $800,000 or less, and to qualify, buyers would have to sign a purchase agreement by April 30, 2010, and close on the home by June 30, 2010.

"Tax credits like this only work by creating the sense of urgency to take advantage of them," said Senator Johnny Isakson, the Georgia Republican who's former real-estate executive. "This is the last extension of the home-buyer tax credit, and I urge all Americans, whether they're first-time buyers who've always dreamed of having a home of their own or someone who's been gridlocked in the failure of our move-up market, to take advantage of this opportunity."

As we reported in "Questionable Claims for $8,000 First-Time Home-Buyer Tax Credit Spawn IRS Investigations," allegations of fraud related to the credit have arisen. (Bloomberg reported the other day that about 1.2 million home buyers have claimed
$8.5 billion in tax credits in 2009 year, according to the U.S. Department of Treasury.) The new legislation includes antifraud language that would give the Internal Revenue Service greater oversight during the processing of returns.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook