The White House said today that President Obama will sign the extension and expansion of the home buyer tax credit into law on Friday morning.
Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn’t owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.
Yesterday, the Senate voted 98-0 to extend and expand the tax credit to include buyers who already own homes. Just today, the House voted 403-12 on the same measure. Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn’t owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.
Senators agreed Wednesday to extend the tax credit for first-time home buyers. There was also an agreement to expand the tax credit to other home-buyers as well. The tax credit provides up to $8,000 to first-time home buyers but is set to expire at the end of November. The Commerce Department said Wednesday that new home sales fell 3.6% in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time home buyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years.
The tax credits would be available to home buyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.
This is not final and will still need to be approved by a vote.
With each passing day it seems more and more likely that the tax credit for first-time home buyers will be extended. The issue now is working out the details.
With anxiety growing about the deficit, how to pay for the tax credit is becoming a major issue.
The proposal in the U.S. Senate that appears to have the greatest chance of passing would extend the $8,000 tax credit through March 31, 2010. The tax credit would then drop by $2,000 each quarter through the end of 2010. So, the tax credit would be $8,000 for all purchases closing before March 31. $6,000 for all closings in April, May and June. $4,000 for all closings in July, August and September. And then $2,000 for all closings in October, November and December of 2010.
It is still unclear if the tax credit will be expanded to include all home buyers or if it will remain for first-time buyers only.
We’ll provide you with the details as they become available.
This week, the U.S. Senate may be voting on an amendment to extend the first-time homebuyer tax credit. One bipartisan amendment sponsored by Senators Christopher Dodd (D-CT), Joseph Lieberman (I-CT) and Johnny Isakson (R-GA) will provide the $8,000 tax credit to any buyer (i.e. not just for first-time homebuyers), set income limits for buyers at $150,000 (single) and $300,000 (married), and continue the credit until June 30, 2010.
If Congress decides to extend and expand the first-time home buyer credit, the Internal Revenue Service wants stronger regulation that would force anyone who claims the credit to actually prove they closed on the property. Currently, the only thing requirement to get the credit is the submission of IRS Form 5405. There is no requirement that a buyer prove that they actually purchased a home. (Click Here To View IRS Form 5405).
Linda Stiff, deputy commissioner of the Internal Revenue Service, told the House Ways and Means Oversight Subcommittee last Thursday that the IRS would support requiring anyone claiming the credit to file a copy of a settlement statement from the U.S. Department of Housing and Urban Development, known as the HUD-1 form, with their tax return. The HUD-1 form lists the property address, buyer and seller as well as costs involved in completing the transaction.
The IRS is currently investigating 167 criminal schemes being used to illegally get the tax credit for first time home buyers. Approximately 100,000 tax credit applications are under investigation. IRS auditors testified that the agency believes it paid thousands of fraudulent tax credit claims, totaling at least $139 million since the first of the year.
The $8,000 tax credit for first-time home buyers is scheduled to expire November 30th. Several bills have been introduced into Congress to extend the tax credit. Check back frequently for updates.
Congress is considering expanding and extending the $8,000 first-time home buyer tax credit, which expires Nov. 30.
More than 1.8 million home buyers will have used the credit by the end of November, including an estimated 355,000 who wouldn’t have bought a home without it, according to the National Association of REALTORS® and other analysts.
Mark Zandi, chief economist for MoodysEconomy.com, is among those in favor of extending the credit. Zandi would also make it available to all homebuyers. “The most fundamental argument for the credit is that nothing works in the economy if housing is falling,” Zandi said. “[The credit] is a good insurance policy. It’s vital to stem the housing price declines.”
Opponents argue that the tax credit is too expensive and doesn’t help enough people.
Extending the credit through the end of 2010 and making it available to single filers earning up to $150,000 and joint filers earning up to $300,000 would cost an estimated $16.7 billion. Some in Congress propose using unspent money from the $787 billion stimulus bill to pay for it.
We’ll keep you updated as Congress continues considering extending the credit.
Some people are asking whether the housing market can function without the $8,000 tax credit. This year, as many as 40% of all home buyers will qualify for the credit. It is on track to cost the government $15 billion – more than twice the amount originally projected. The real estate industry, as well as some economists, believe that the money is well spent – encouraging recovery in the housing market. According to analysts, the credit is directly responsible for several hundred thousand home sales.
The National Association of Realtors wants Congress to extend the credit at least through next summer, to expand the program to $15,000 and to allow all buyers, not just those who have been out of the market for at least three years, to qualify. The price tag on that plan: $50 billion to $100 billion.
The National Association of Realtors estimates that about 350,000 sales this year would not have happened without the lure of the tax credit. Moody’s Economy.com used computer modeling to put the number at 400,000.
There are several bills in the Senate and House lawmakers will consider before the expiration of the current tax credit on November 30th.
Bills to extend the maximum $8,000 tax credit for first-time home buyers, which expires Nov. 30, are pending in both the U.S. House and the Senate.
Sen. Christopher J. Dodd, a Connecticut Democrat and chairman of the Senate Banking, Housing, and Urban Affairs Committee, is co-sponsor of a bill with Georgia Republican Sen. Johnny Isakson that would raise the credit amount to a maximum of $15,000.
Senate Majority Leader Harry M. Reid of Nevada favors an extension of the current credit. He was quoted by the Las Vegas Sun saying, “It’s something we can get done.”
Odds are that the credit will be extended and broadened to cover all buyers next year, but the chances of the amount increasing aren’t as good, observers say.
Source: Washington Post Writers Group, Kenneth R. Harney
While Congress is at recess, housing lobbyists are gearing up a major campaign to extend the $8,000 home buyer tax credit, which is scheduled to expire November 30. The National Association of Home Builders and the National Association of Realtors want to persuade Congress to extend the credit, and maybe even broaden its coverage, as soon as possible. The home builders are mounting an aggressive campaign. The association is sending out local teams of members to meet with congressmen and senators in their home districts. The extension of the credit appears to have growing bipartisan support. However nobody should assume it’s a done deal, until it is.
