For some time we’ve been talking about the first time homebuyers tax credit that was passed as a part of the 2009 Economic Stimulus Package. As we mentioned a short time ago, if you haven’t already put in a contract on a house and set up your closing for before November 30th, you most likely are already too late to receive the original first time homebuyer check.
This week there has been some movement on talks for extending the current tax credit out until next year, and then making a new provision that would allow current homeowners to take advantage as well – to the tune of a $6500 tax credit. The cost of the tax credits? Somewhere in the ballpark of $10.8 billion.
Extension Of The $8000 Tax Credit
The current first time homebuyer tax credit is going to be running out on November 20th, 2009. Many feel that it has had a positive stimulative effect on our economy, and they would like to keep the train rolling. Now there is some indication that they may get their wish. The New York Times reports that Senators from both parties have reached an agreement to extend the tax credit:
Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.
The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said Wednesday that new home sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev…..
If the Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have also said they support extending the tax credit for homebuyers.
So they hope to extend the current $8000 tax credit for first time buyers, while at the same time offering a new tax credit for current homebuyers of $6500. Some provisions of the new bill:
- The credit is available for homes that go under contract by April 30, 2010 and close within 60 days after that.
- It will be attached to a bill to extend unemployment benefits. (NOW PASSED!)
- First-time buyers (those who have not owned a home for three years) can continue to claim an $8,000 credit.
- Income limits: $125,000 a year for individuals, $225,000 a year for married couples. (higher limits than before)
- Homes that cost more than $800,000 aren’t eligible for the credit.
- You must be 18 years old to claim the credit.
- Credit is available for primary residences only (no vacation homes)
- The proposal will include anti-fraud measures, including minimum age requirements and additional authorities for the IRS. (there have been problems for the current credit with fraud.)
New $6500 Homebuyer Tax Credit For Current Homeowners (Not Retroactive)
In addition to extending the current credit and adding some new anti-fraud measures, the new bill would update the tax credit to include “move-up buyers”, in other words, people who already own a home. This is certainly going to be popular with a lot of people that were holding off upgrading their home because they weren’t included in the credit previously.
So what criteria do current homeowners have to meet to get the $6500 credit?
- The credit is available for homes that go under contract by April 30, 2010 and close within 60 days after that.
- Current homeowners can claim a $6,500 credit as long as the property they are vacating has been their primary residence for at least five consecutive years out of the last eight.
- Income limits: $125,000 a year for individuals, $225,000 a year for married couples. (higher limits than before)
- Homes that cost more than $800,000 aren’t eligible for the credit.
- $6500 tax credit is not retroactive. (from the language of the bill: “shall apply to residences purchased after the date of the enactment of this Act.”
Since my wife and I have only owned our home for 3 years, we wouldn’t be eligible. That’s all right, our current home will do just fine for a few more years.
Update: 11/5/2009 – The bill has passed both the house and the senate. Now it only needs the president’s signature.
Are you considering becoming a first time homebuyer, or upgrading your current home because of the tax credit? Do you think that the credit will artificially re-inflate the real estate bubble? Is the credit a good idea to begin with?
Source: biblemoneymatters.com