The Senate approved the $838 billion economic stimulus bill which includes tax credit provisions for homebuyers Tuesday by a vote of a 61-37.

Tax credits amounting to $15,000 or 10% of the home’s purchase price whichever is lower was approved by the Senate in their stimulus bill. This provision was an improvement of tax credit provision in the Housing Recovery Act which was passed last summer.

The tax credit will apply to all buyers and not just for first time homebuyers. The credit has no income limits. No matter how much is the family’s income, they can qualify. The Senate's version doubled the $7,500 homebuyer tax credit provision proposed by the House.

Also, unlike the tax credit which has to be paid in the previous housing recovery act which seems more like an interest free loan, the new bill tax credits will not be repaid. The impact of of which is expected to be more evident. 

The Senate bill when enacted is expected to draw an added one million buyers as they will try to grab the opportunity as they can see this as a discount. A recent National Association of Home Builders' survey, of more than 1,200 registered voters, showed that 61 percent of renters and one third of the respondent would be more likely to buy a home when the $15,000 home buyer tax credit were to be enacted into law.

With the tax credit and low mortgage rates, the market is seen to improve and potential buyers will now act as they might think that the prices will now start to go up."Consumers are saying, 'Why buy now?' With money on the table, more would jump at the opportunity," said Lawrence Yun, the chief economist of National Association of Realtors.

The differencesThe Senate tax credit is non-refundable. That means, if your tax obligation is less than the credit, you only receive an amount equal to your tax bill, no more. But if your tax payable is less than $15,000, you won’t receive the excess as a refund but you can use the remaining credit for the next year’s taxes.

Another difference is that the Senate credit is good for one year after enactment while the following its enactment and is not retroactive while the House’s tax credit provision is retroactive to the start of 2009 but will expire at the end of June.

After approval of the Senate stimulus bill, they will meet with the House to bring together the two versions and settle the differences.