Will It Be Effective?
by Jann Swanson
It is finally official. The homebuyers' tax credit has been extended to April 30, 2010.
President Barack Obama approved the extension as part of a $24 billion economic stimulus bill signed Friday. The bill also includes an extension of unemployment benefits to the longtime jobless and tax credits for some businesses.
The housing tax credit portion of the bill extends the $8,000 tax credit for home buyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to other homeowners who have lived in their current home for at least five years and are seeking to relocate.
Another modification to the original legislation raises the income limits for program participation from $75,000 for a single purchaser to $125,000 and from $125,000 to $225,000 for a couple. There are also credits available on a diminishing basis above those income limits.
The bill was passed by the Senate on Wednesday evening and by the House on Thursday. Both bodies acted in a bipartisan manner which has seldom been seen this year. The Senate passage was unanimous; the House voted 403 to 12 for the bill.
Housing interests as well as the Obama Administration had lobbied heavily for the extension. In a statement released after the House passage of the legislation, Mortgage Bankers Association Chairman Robert E. Story, Jr., said, "At a time when we are finally starting to see some signs of life in the housing and mortgage markets, extending and expanding the homebuyer tax credit is a critical step to keeping the momentum. This has been one of MBA's top single family legislative priorities, and we are very glad to see that policymakers on both sides of the aisle see the importance of this measure.
"The existing credit for first-time homebuyers has helped move a segment of potential homebuyers off the sidelines and into their first homes. By expanding it to qualified existing homeowners, we can help stimulate even more home purchases for qualified buyers. I also want to applaud measures in the bill that will help eliminate fraudulent use of the tax credit."
The Associated Press quoted Rep. Shelley Berkley that the bill "will allow more people to purchase a home in my district and help stop the continued downward spiral in housing prices caused by the foreclosure crisis." Shelly represents Nevada, a state that has been particularly hard-hit by the housing collapse.
Critics of the bill have said that it is merely accelerating purchases that would have occurred anyway and creating yet another artificial housing bubble.
Mortgage News Daily Managing Editor Adam Quinones said, "It is likely that the prior tax credit's Nov.30 expiration has already stolen a portion of housing demand from 2010. On a broader scale, the extent to which the tax credit extension adds new demand is a function of buyer's perception of home prices, liquidity in the secondary mortgage market, and the health of the labor market. Overall, while the home buyer tax credit extension is a net positive for the industry, there are still several structural ineffficiences that must be addressed before housing can gain recovery momentum".
In signing the bill President Obama stressed that the measure is revenue neutral and will not increase the deficit.
The NAR has published an informative page on the home buyer tax credit extension.
http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit
Friday, November 6, 2009
Thursday, November 5, 2009
First time home buyer tax credit gets unanimous Senate approval
A measure to extend and expand the first-time home buyer tax credit won unanimous Senate approval Wednesday on a 98-0 vote, and House passage would send it to President Barack Obama for his signature into law.
House Majority Leader Steny Hoyer, a Maryland Democrat, said the chamber may act on it Thursday.
If passed into law, the new tax credit would extend the existing credit for first-time homebuyers, worth up to $8,000, and offer a new credit of up to $6,500 for some existing homeowners.
The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years.
The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.
The maximum allowed home purchase price would be $800,000.
A home buyer must have a sale agreement in hand by April 30 and close escrow by June 30, 2010.
Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit.
That's all good news for the housing market.
The National Association of Realtors says as many as 400,000 resale transactions (1.2 million for both new and resale homes) were completed specifically because of the first-time home buyer tax credit, since it began, and that put a dent in the housing inventory.
Home sales also add property and sales tax revenues to the coffers of local governments as reduced inventory helps boost prices and home values.
Fortunately, the first-time home buyer tax credit's availability has coincided with mortgage rates often hanging below 5 percent, according to Jeff Howard, CEO of Erate.com.
As the Nov. 30 tax credit deadline neared, reports from the Commerce Department, revealed new home sales slipped 3.6 percent in September and were down 7.8 percent from September 2008.
Tax credit history
As part of the Housing and Economic Recovery Act of 2008, Congress first created a $7,500 first-time home buyer tax credit for those who purchased a home between April 8, 2008, and July 1, 2009.
Later, under the American Recovery and Reinvestment Act of 2009, Congress extended the credit and raised it to an$8,000 tax credit for those who purchased homes by the current Nov. 30, 2009 expiration date.
By October 9, 2009, more than 1.2 million tax returns had claimed about $8.5 billion in the refundable tax credit, for both new and resale homes - according to the Treasury Inspector General for Tax Administration (TIGTA).
A TIGTA audit also revealed last month that nearly 90,000 taxpayers -- including nearly 600 children -- may have fraudulently enjoyed the credit, hoodwinking the government out of more than $600 million.
The new legislation includes provisions to stifle fraud after the Internal Revenue Service identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.
Cheating the IRS is a federal felony that comes with a fine of up to $250,000 and three years in a federal pen, or both.
To combat fraud, a HUD-1 Settlement Statement will have to be attached to the tax return to secure the credit.
For more info:
Broderick Perkins, operates the Silicon Valley-based DeadlineNews Group digital news service. Get the feed from the Deadline Newsroom
Perkins is the National
• Consumer News Examiner
• Offbeat News Examiner
• Real Estate News Examiner
House Majority Leader Steny Hoyer, a Maryland Democrat, said the chamber may act on it Thursday.
If passed into law, the new tax credit would extend the existing credit for first-time homebuyers, worth up to $8,000, and offer a new credit of up to $6,500 for some existing homeowners.
The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years.
The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.
The maximum allowed home purchase price would be $800,000.
A home buyer must have a sale agreement in hand by April 30 and close escrow by June 30, 2010.
Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit.
That's all good news for the housing market.
The National Association of Realtors says as many as 400,000 resale transactions (1.2 million for both new and resale homes) were completed specifically because of the first-time home buyer tax credit, since it began, and that put a dent in the housing inventory.
Home sales also add property and sales tax revenues to the coffers of local governments as reduced inventory helps boost prices and home values.
Fortunately, the first-time home buyer tax credit's availability has coincided with mortgage rates often hanging below 5 percent, according to Jeff Howard, CEO of Erate.com.
As the Nov. 30 tax credit deadline neared, reports from the Commerce Department, revealed new home sales slipped 3.6 percent in September and were down 7.8 percent from September 2008.
Tax credit history
As part of the Housing and Economic Recovery Act of 2008, Congress first created a $7,500 first-time home buyer tax credit for those who purchased a home between April 8, 2008, and July 1, 2009.
Later, under the American Recovery and Reinvestment Act of 2009, Congress extended the credit and raised it to an$8,000 tax credit for those who purchased homes by the current Nov. 30, 2009 expiration date.
By October 9, 2009, more than 1.2 million tax returns had claimed about $8.5 billion in the refundable tax credit, for both new and resale homes - according to the Treasury Inspector General for Tax Administration (TIGTA).
A TIGTA audit also revealed last month that nearly 90,000 taxpayers -- including nearly 600 children -- may have fraudulently enjoyed the credit, hoodwinking the government out of more than $600 million.
The new legislation includes provisions to stifle fraud after the Internal Revenue Service identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.
Cheating the IRS is a federal felony that comes with a fine of up to $250,000 and three years in a federal pen, or both.
To combat fraud, a HUD-1 Settlement Statement will have to be attached to the tax return to secure the credit.
For more info:
Broderick Perkins, operates the Silicon Valley-based DeadlineNews Group digital news service. Get the feed from the Deadline Newsroom
Perkins is the National
• Consumer News Examiner
• Offbeat News Examiner
• Real Estate News Examiner
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