Well, the Washington D.C. faithful finally did it! After months of build up & endless speculation, the House of Representative has passed an extension of the home buyer tax credit by an overwhelming majority (403-12). In an attempt to stave off further job losses and boost an otherwise lackluster economy, the highly successful tax credit has been extended until June 30th and expanded to include 2nd time or “move-up” buyers as well.
Below is a quick run-down of the changes and improvements to the original bill signed back in February of this year:
1. First Time Homebuyers – First time home buyers (defined as those who have not had an ownership interest in a home for 3 years) still qualify for a credit in the amount of 10% of their purchase price, with a maximum of $8,000. However, the original deadline for closing has been pushed back from November 30th, 2009 to June 30th, 2010 as long as the house is under contract by April 30th, 2010. The income limits have also been raised to $125,000 for a single buyer (previously $75,000) and up to $225,000 for a married couple.
2. Current Homeowners – The tax credit has also been expanded to include “move-up” buyers, and provides a $6,500 credit for those who are selling their existing primary residence and moving to a new primary residence. The buyer must have lived in their current residence for at least 5 consecutive years out of the last 8 in order to qualify for the credit, and must be under contract on a new home between November 7th, 2009 and April 30th, 2010 (closing by June 30th). The income requirements are the same as 1st time homebuyers. According to Alec Phillips, an economist with Goldman Sachs, 70% of all current homeowners will be eligible for this new tax credit.
3. Additional Changes – A few other miscellaneous changes were made to the new plan as well. The credit can now only be used on primary residences purchased for less than $800,000 and only individuals above the age of 18 are eligible. In one of the strangest acts of fraud regarding the credit, a 4 year old child claimed the 1st time homebuyer tax credit back in October, prompting the change in age requirements.
There are some lingering questions as to whether the tax credit is worth the expense to tax payers or not. Some economists don’t believe that it will have that big of an effect on the overall housing market, however some estimates show it will cost the federal government up to $43,000 in lost revenue for every extra sale that the credit generates. With a ballooning federal deficit of nearly 1.4 trillion, some are concerned that the cost may be much greater than the benefit.
What’s my opinion? Well, the day that I’m voted in as President of the United States, I’ll start worrying about balancing the federal budget. Right now I’m simply a Realtor in Florida, and my current job is to make sure that all of my clients know about every possible benefit of homeownership. And to that end, the new homebuyer tax credit sure looks like a winner in my book.
For more information, check out this website provided by the Home Builders Association:
http://www.federalhousingtaxcredit.com/home.html
Previous Related Posts:
http://mattrobinsonrealtor.blogspot.com/2009/05/big-big-news-for-1st-time-homebuyers.html
