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Senate Approves Homebuyer Tax Credit Extension

by Jann Swanson on
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The Senate voted unanimously Wednesday night to extend the $8,000 tax credit for home buyers beyond its scheduled November 30, 2009 expiration date.  The credit would be available until April 30, 2010.  Under the new legislation the credit will also now apply to home buyers who are buying their second or subsequent home.  The credit currently applies only to first time home buyer.

The Senate vote was 98 to 0.

Under a compromise reached late last week, the tax credit for veteran homeowners will apply only to those who have lived in their current residence for at least five years.  The credit for these buyers will be capped at $6,500 while first time buyers will continue to receive $8,000.

Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000 respectively.  Above those limits there are diminishing credits available.

The bill was passed as an amendment to legislation extending unemployment benefits.  The House is expected to vote on the bill before the end of the week.

Housing interests, especially the National Association of Home Builders and the National Association of Realtors, has pushed strongly for the extension and the Obama administration has also lobbied heavily for its passage. However, not everyone was in favor of it.

Some critics have charged that the tax credit has merely moved sales that would have occurred sooner or later to an earlier date and that, when the credit finally does go away, the market will experience another severe downturn. A diametrically opposed opinion would have it that, while 1.4 million claims have been made, few sales were actually inspired by the credit.  Others have argued that the current interest rates and low housing prices are enough of an incentive without spending tax money. The extension is expected to cost an estimated $11 billion on top of the $10 billion that has been spent to date.

There have also been charges of fraud in the operation of the program.  To combat this the new law has some expanded safeguards including a minimum age of 18 for obtaining the credit, a requirement that a settlement statement accompany the tax return claiming the credit and a prohibition on non-arms length transactions.

Another criticism of the extension has been that it ends just as the "spring market" is getting underway.  Diane Olick writing for CNBC's RealtyCheck said it "is sort of like offering cheap snow boots in July."


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on
Will this bill as currently written help me at all? I'm a single home buyer who closed on September 11,2009. My income is 102,000 so I did NOT qualify for the current credit as my income was slightly over the cap. I'll be really upset if this extension of the credit would have given me the $8000 if I had simply waited an extra 2 months to purchase. Someon please tell me the income cap change is retroactive!!!
on
I'm still waiting for the 2008 $7500 repayable first-time homebuyer tax credit to be retroactively modified so that it does not have to be repaid... Don't hold your breath. :)
on
Sorry Matt but the income cap change will not be proactive. It's all based on the date of when you closed on the house, like the no interest tax credit/loan that Brandon is talking about.
on
I was HOPING that since there are so many different versions of this credit (2008, early 2009, and now late 2009) that they would simplify the IRS reporting and make it one easy process. Why must everything be so compicated? (Oh wait, I remember, we're talking about the IRS and Federal Taxes.)
on
Matt ---- I would talk to a good CPA. Couldn't you take part of December off and get your income down to $99,900? Or now that you are a homeowner you should be able to deduct interest from Oct-Dec to get your AGI under the $100k limit. I believe it goes off your AGI not your salary. I don't think the IRS has a way of knowing your year to date income is - so I think you still have time to ensure you'd qualify for the 2009 credit of $8k.