As we have talked about before, first time home buyers have been getting tax credits of up to $8,000 when they buy a new home. That program, as part of the economic stimulus package, was set to expire at the end of this month, the end of November 2009. The United States Senate voted on Wednesday November 4, 2009 to expand and extend the tax credits for home buyers. The United States House of Representatives voted on the bill on November 5, 2009, and the President Obama is expected to sign it into law today, November 6, 2009.
Here are some of the details about the $8,000 Tax Credit Extension for first time home buyers and details of the additional $6,500 for home buyers:
- First time home buyers (or anyone who has not owned a home in the last 3 years get up to $8,000.
- Home buyers who have owned their current homes at least 5 years are eligible for tax credits of up to $6,500.
- The home buyer tax credit is available for the purchase of "principal homes" costing $800,000 or less (vacation homes are ineligible).
- Individuals who make up to $125,000 and joint filers with incomes up to $225,000 qualify for the full credit. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.
- The home buyer tax credit is extended for another year (until June 30, 2011 for members of the military serving outside the USA for at least 90 days.
- Ten percent of the purchase price of a primary residence, up to a maximum of $8,000 for first-time buyers and $6,500 for others.
- Purchase agreements must be signed by April 30 and closings must be final by June 30.
- The deadline is extended by a year for those who have served outside the United States for at least 90 days from Jan. 1, 2009, to May 1, 2010.
HOW TO APPLY: Taxpayers can claim the credit on their federal tax returns. If the credit exceeds the tax bill, the government will issue a payment. Taxpayers who want immediate refunds can amend their 2008 returns.
By expanding and extending the home buyer tax credit, it is expected to cost the United States government more than $10.8 billion dollars of lost tax revenue. However, about 1.4 million first-time home buyers have already qualified for the tax credit for home buyers. The National Association of Realtors says that about 350,000 of them would not have purchased their homes without the credit, so it appears to be working.
The National Association of Home Builders (NAHB) is applauding Congress for passing this legislation that will extend and expand the $8,000 first-time home buyer tax credit, stating that "this will provide a much-needed boost to the fragile housing market and economy." The NAHB estimates that the extended and expanded home buyer tax credit will create 211,000 jobs and generate 180,000 additional home sales in the coming year. It is also expected to generate $9.6 billion in wage income and $6.9 billion in federal, state and local taxes.