Congress Expands Homebuyers Tax Credit

House Passes Measure Which Extends $8,000 Credit for First-Time Buyers, Adds $6,500 Credit for Some Current Homeowners

(AP)  Buying a home is about to get cheaper for a whole new crop of homebuyers - $6,500 cheaper.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the House voted 403-12 Thursday to extend and expand the tax credit to include many buyers who already own homes. The Senate approved the measure Wednesday, and President Barack Obama is expected to sign it.

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.

"This is probably the last extension," said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.

The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that was included in a bill extending unemployment benefits for those without a job for more than a year. The other would let companies now losing money recoup taxes they paid on profits earned in the previous five years.

"We are still in a world of economic hurt, and Congress must continue to act boldly and creatively," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. "With the right mix of tax breaks and investments we will get through this recession and get folks working again."

The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.

"For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," Bond said. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.

Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.

The business tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years, giving them refunds of taxes paid in those years. Under current law, businesses with annual gross receipts of more than $15 million can claim losses back only two years.

The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. Congress included a scaled-back version of the tax break - for companies with revenues of $15 million or less - in the economic recovery package enacted in February. The new tax break would be available to companies of any size, providing a quick source of cash.

The U.S Chamber of Commerce has been a big backer of the tax break for money-losing companies.

"It frees up capital that they can use to maintain jobs and potentially even hire new people as the economy returns," said Caroline Harris, senior tax counsel for the U.S. Chamber of Commerce.

The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.



The bill is H.R. 3548.

[saturn05]

I just don't understand. The people that really need the help are not getting it. People who are qualifying for these first-time home buyers and other write-offs, already have the money to buy homes, otherwise they wouldn't be looking. The cash for clunkers is the same thing. People were already able to purchase a vehicle and they were lucky to fall into this scheme. But the lower middle-class don't even dream of buying a home. They dream of paying rent, paying for food and paying for heat. I don't care about first-time home buyers right now. I care about my neighbors having enough to eat. I don't care about the auto industry and the housing industry right now. I care about my fellow employee that had her heat turned off yesterday and has two kids and a husband in the hospital. Who made out on the above??? The auto and housing industry and those who already could. I find this very, very sad and disappointing. I am losing faith in Obama and who he is really trying to help. Now he was in a meeting with an American Indian coalition. I have great respect for American Indians and the rich history they are a part of. But he made it sound like they were a special group who he had to explain just what their group can expect form the new Healthcare reform. Do they get something different than me or the Blacks or Asians or learning disabled or gays or...or....? I just don't get what is going on?

[armyoftwelve]

I guess this sort of thing can't hurt. FYI--my sources tell me that if you are thinking of amending your 2008 taxes to get the $8000 credit available now-you should wait. Apply for the $8000 credit on your 2009 return, you will wait less time to get your money.

[losingequity]

"To qualify for the $6,500 credit you must be in your first your home for at least five years"

So that means that thos of us with less than five years and not a new first time buyer get screwed with lower property values, loss of equity and increased property taxes! I bought my condo in 2006. Where is the fairness?

[zacklou]

So if I bought my house in 2007 do I get the 6,500?

[Agriggs888]

What about all of the people who took the homebuyer credit of 7500, that they will have to pay back? Why should they have to pay money back when others do not? Most of them have lost money on their homes and continue to do so, they should not be punished for trying to stimulate the economy months before this new homebuyers credit came into play!

[Skirt-Lifter]

I am one of those idiots that bought in 2008. I barely didn't qualify for cash for clunkers.

[cindy63448]

The new tax credit will have a gap for some home buyers of 2009. People who have been in their homes for under 5 years, me- I owned my home for 4.5 years and sold it on a contract for deed because of the inability of my buyer to obtain financing. I purchased my new home last month and being considered a "repeat buyer" wont be able to file for the "new" tax credit. They should lower the time necessary to have owned your home and purchase a new home in order to get the credit. FYI I sold my home for less then I had in it too, so where's my credit?

[indianascott]

My brother and I both pruchased homes at the end of 2008, when economists were begging people to invest in the housing market. We took a risk on purchasing a home in an unsure economy and we both have to repay our tax credits. Now it has become a smack in the face, what's fair for one is fair for everyone.

[chonder2]

Who were the 12 that voted no?

[rebecca391148]

yes, you get an $8,000.00 credit but for a $75,000.00 home you have to pay $60,000.00 interest rate for a 30 year loan. What's up with that? It doesn't make sense to me.

[marcodele]

This has helped me make the decision to go ahead and purchase the home I am now renting.

Has anybody noticed the stock market lately? We're a lot better off than we were one year ago. I doubt if Rush and his Lemmings could admit that, but the evidence is undeniable.

[culturechang]

I heard a informational discussion on the radio by a law school profressor who was very familiar with the program.

Actually, the first time buyer credit did not begin in January 2009. It began in July 2008 under a Bush program for $7500. The stimulus bill raised it to $8K.

[lightningF]

Expanded to more 4 year olds and illegals,and they want you to trust them with your health care?

[USA_is_back]

by lightningF November 5, 2009 1:05 PM EST
Expanded to more 4 year olds
------------------------------------------------
cool, that means you can now move out of mommies basement and get your own place.

[chonder2]

"For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," Bond said. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."

In other words it would be like having a horrible, terrible, "regulation" that would require the loan officer to determine wether the applicant would qualify if the 6 to 8 thousand dollar credit were applied?

[pubsrtoast]

As someone who just got pre-approved as the first step in buying a home, I can assure you that the mortgage lenders are not looking beyond your income and assets.