Homebuyer Tax Credit
Congress has extended and expanded the homebuyer tax credit. Certainly good news for buyers, sellers, lenders and real estate agents since the credit is designed to give the real estate and mortgage industry a much needed shot in the arm. As with most of what our government does there are always some questions about who is eligible and exactly what one can expect.
The homebuyer tax credit now runs until April 30, 2010, a six month extension from the original program which is hoped to add another approximately 350,000 purchasers to take advantage of the program. The program has been extended to include current homeowners which should expand the number of people taking advantage of the program to over 500,000. There are some key areas and questions that need to be clarified for those thinking now may be the time to make a move as a first time buyer or current homeowner looking to find another home.
Existing homeowners must have used the home sold or being sold as a principal residence consecutively for five of the previous eight years. It does not matter if your new house costs more or less as long as you meet the above requirement. Your credit as a current homeowner will be $6500 or $3250 if married and filing separately. Income limits have also been increased to include more people eligible from $75,000 for single and $150,000 married to $125,000 single and $225,000 for married. In the original plan there was no limitation on cost of the purchased home but that has now changed to a $800,000 purchase price which is well above the median price of homes. The original plan called for the home to close no later than December 1, 2009 but the new plan has been expanded to include any home that has a binding contract to purchase in effect on April 30, 2010. The purchaser has until July 1, 2010 to close to be eligible to receive the tax credit.
The homebuyer tax credit is an effort to jump start the housing market and hopefully more than the half million expected homebuyers will take advantage of the program. With the volatile stock market and unemployment rising any advantage is a welcome addition to helping us get back on our feet. As many economists have said, the strength of the housing market is an indicator of economic activity and the economic strength of this country.
Extension of homebuyer tax credit
An extension of the homebuyer tax credit is assured, now that both the Senate and House of Representatives have passed the measure. President Barack Obama is expected to sign the new homebuyer tax credit bill on Friday, Nov. 6.
The Senate's 98-0 unanimous approval of the measure on Nov. 4, followed by passage in the House on Thursday by a 403-12 vote the following day, is an indication of how popular the program is. It is attached to a bill that will also give 20 weeks of extra unemployment insurance to people who have been jobless since last year.
Only first-time homebuyers were eligible to benefit from the original tax credit, which was first offered as part of the Housing and Economic Recovery Act of 2008. At that time, a $7,500 first-time home buyer tax credit was available for those who purchased a home between April 8, 2008, and July 1, 2009. Then, under Obama's American Recovery and Reinvestment Act of 2009, Congress raised the credit to $8,000 and extended the deadline to Nov. 30.
The extension of the homebuyer tax credit, as stated in House Bill 3548, makes the program available to many current homeowners as well as first-time home buyers. First-time buyers (or anyone who hasn't owned a home in the past three years) would still be able to get the $8,000 credit, and current qualified homeowners could get a tax credit of up to $6,500. The lesser amount would be available to homebuyers who have been in their current residence for a consecutive five-year period in the past eight years. To qualify for the tax credit, participants must meet certain income limits and would have to sign a purchase agreement by April 30, 2010, and close by June 30.
Under the new bill, intended to help spur activity in the slumping real estate market in Chicago and elsewhere, qualifying income levels have been raised to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.
The maximum purchase price allowed for any house or condo would be $800,000, and only for principal residences, so vacation homes would not qualify.
According to the National Association of Realtors, which has been lobbying for an extension , as many as 400,000 resale transactions (out of 1.2 million homes sold through the program) were completed specifically because of the first-time home buyer tax credit, thereby helping to clear up the glut of available properties. Supporters believe the benefits of extending and expanding the tax credit will outweigh the cost, which could amount to as much as $10.8 billion in lost taxes.
According to U.S. Treasury statistics released in October, about $8.5 billion in refunds have already been claimed for new and resale homes. Provisions to curb fraud were added to the extension of the homebuyer tax credit after the Internal Revenue Service identified 167 suspected criminal schemes and began examining more than 100,000 potential civil violations of the program.
Homebuyer Tax Credit
The program today is called the American Recovery and Reinvestment Act of 2009 and authorizes up to $8,000 tax credit for first-time home buyers purchasing a principal residence. Many people have questions about the homebuyer tax credit and below are some of the answers for our buyers. Remember you should consult a qualified tax advisor or legal professional about your unique situation.
As the program now stands, which is scheduled to end on December 1, 2009, first time homebuyers purchasing any kind of home - new or resale - are eligible for the homebuyer tax credit. The definition of a first time home or condo buyer is as follows; a buyer who has not owned a principal residence during the three year period prior to the purchase. For married buyers the test is of both home buyer and his/her spouse. This year's tax credit is different from last year's because it does not have to be paid back. This year's tax credit is a true credit, not an interest free loan. However, the home buyer must use the residence as their principal residence for at least three years or possibly face a recapture of the tax credit amount. Claiming the tax credit has also been made easier. All you have to do is complete the tax credit on IRS form 5405 to determine the amount and then claim the amount on line 69 of your 1040 income tax return. No other applications and forms are needed. This is what is now available but Congress is on the verge of modifying and extending the program to include more potential homeowners who can take advantage of the credit. The latest idea under consideration is a credit of $6,500 for homeowners looking to trade up to a bigger primary residence and who have already lived in their current home for five years. To qualify for the full credit homebuyers must have adjusted gross income of less than $125,000 or $225,000 for married couples filing jointly. The homebuyer tax credit will only apply to homes sold for $800,000 or less and contracts to buy a home must be signed by April 30, 2010 and must close by June 30, 2010.
Support of the changes is bipartisan which gives an extension a much better chance than ever before. Supporters maintain the current credit has helped boost existing home sales and more is needed going into 2010 to stabilize prices and generate jobs in a year when a rise in foreclosures is expected.
Is the Homebuyer Tax Credit Working?
Housing Tax Credit Working
Consumers are just starting to see a ray of hope for the housing market and the overall economy because of the Homebuyer Tax Credit. The housing market has been on the rise and numbers have been increasing for the last seven months. Although it is on the rise, it is up to Congress to make that hope, a reality by building on the momentum that was created by the $8000 home buyer tax credit. There are many ways that Congress can build the momentum and keep the housing market on the upswing.
One way to build momentum is for Congress to extend the home buyer tax credit. Home sales have jumped in recent months and the housing inventory has improved. This has resulted in a stabilization of home prices. Why not keep a good thing going.? If it’s not broke, then don’t fix it! If they stop this homebuyer tax credit too quickly, in other words before the economy turns around, then the economy could end up worse then it started and on top of it be way more in debt.
Now is the time to build on home sales and expand it to all home buyers. Prices are low and it is a great time to buy, especially with the Homebuyer Tax Credit that is slated to expire November 30th. However, this cannot help new purchasers now who write a contract today, because they won’t be able to close before the deadline. Without Congress acting now, the market and our national economy may freeze again, possibly as soon as this month.
There are a number of other actions that can strengthen the economy as well. First of all, make the FHA and Fannie May/Freddie Mac loan limits permanent, those programs are set to expire at the end of the year. Maintaining current loan limits would ensure that families would have access to low cost financing and also refinance problematic loans into safer, more affordable mortgages.
Also Congress should continue to aid in the secondary mortgage market. Without this help, market participants will have no incentive to reach out to lower incomes consumers who have great credit. They need the federal government involvement in the secondary mortgage market. We must ensure that the housing markets works in all aspects of the market at all times and the mortgage capital is provided to all qualified and potential purchasers in a way that promotes sustainable homeownership. It is time to end this downturn and finally recover from all the damage done!
Homebuyer Tax Credit
If you will remember back in 2008 then President Bush signed a Homebuyer Tax Credit that was to stimulate home buying going into 2009. The Housing and Economic Recovery Act of 2008 authorized a $7,500.00 tax credit for qualified first-time home buyers purchasing homes on or after April 2008 and before January 1, 2009. The program has since expired but has been replaced with a much better and larger plan.
The Homebuyer Tax Credit offered today is as follows but changes may be on the way:
- The tax credit is for first-time home buyers only.
- The tax credit does not have to be repaid.
- The tax credit is equal to 10 per cent of the home's purchase price up to a maximum of $8,000.00.
- The credit is available for homes purchased on or after January 1, 2009 and before November 30, 2009.
- Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
The program today is called the American Recovery and Reinvestment Act of 2009 and authorizes up to $8,000 tax credit for first-time home buyers purchasing a principal residence. Many people have questions about the program and below are some of the answers for our buyers. Remember you should consult a qualified tax advisor or legal professional about your unique situation.
First time homebuyers purchasing any kind of home - new or resale - are eligible for the tax credit. The definition of a first time home or condo buyer is as follows; a buyer who has not owned a principal residence during the three year period prior to the purchase. For married buyers the test is of both home buyer and his/her spouse. This year's tax credit is different from last year's because it does not have to be paid back. This year's tax credit is a true credit, not an interest free loan as was last year. However, the home buyer must use the residence as their principal residence for at least three years or possibly face a recapture of the tax credit amount. Claiming the tax credit has also been made easier. All you have to do is complete the tax credit on IRS form 5405 to determine the amount and then claim the amount on line 69 of your 1040 income tax return. No other applications and forms are needed.
Recently Congress passed a bill extending the Home buyer Tax Credit past the November 30 date for military, diplomatic and intelligence personnel serving overseas. The extension of this House bill paves the way for the continued tax credit and word is, offering an expansion of the entire program including offering the credit to a broader group of buyers, such as replacement home buyers whose income does not exceed some limit. Hopefully we will have word of the possible extension in the next few weeks but if you are interested in purchasing and meet the guidelines of the original program don't hesitate to act now. You never know what Congress may do and you would not want to miss out on this opportunity.
