First Time Home Buyer Bill
by Evan Vanderwey on 15/12/09 at 2:05 pm
Washington has a hard time letting any popular program die, so it surprised no one that President Obama signed into law a bill approving the extension of the $8000 first-time home-buyer tax credit. Slated originally to end on November 30 of this year, the incentive is now available until the end of 2010, though in a phase-out version (I’ll explain that in a moment). But some were happily surprised to see that there were new provisions designed to stimulate activity in different segments of the market. The new bill includes wider income qualifications and a $6500 credit for replacement home buyers.
So what are the updates to the old bill?
First-time buyers purchasing a home after January 1, 2009 and before April 30, 2010 (closing finalized by June 30) are eligible for the full $8,000 credit. This extends the original bill by four months. Purchases made from April 1 to December 31 of 2010 are eligible for a phased-out version which drops $2000 in each subsequent quarter (so a purchase in June of 2010, for example, would be eligible for a $6,000 credit; a purchase in September a $4000 credit, and in December of 2010 a $2000 credit).
The new bill also includes adjusted-income qualification limits. The credit is now available to individuals with adjusted gross income of $125,000, up from $75,000, and to $250,000 for couples, up from $150,000. But these new limits are only available on homes purchased after November 6, 2009.
And what are the new provisions?
Those who missed the $8000 credit because they were already in their first home may be eligible for a $6500 credit if they 1) have lived in the same residence for 5 consecutive years out of the last 8; 2) bought the new home after November 6, 2009; 3) have adjusted gross income within the qualification limits (see above); 4) are buying a new home valued at $800,000 or less; and 5) will reside in the new home for at least three years (otherwise, you’ll pay it back).
So why extend the program?
1. Popular programs are rare in D.C., and this one’s been a hit with everyone’s constituents.
2. A mere extension of the original provisions may have flopped as most who can take advantage of it already have. And as much as Washington loves a popular program, they abhor a failure—thus the wider provisions for eligible income levels and home values.
3. Our government’s attempts at stimulating an overall economic recovery have, to say the least, fallen a little short of expectations. So it should be no surprise that they would run hard after the glimmers of hope in the real estate market.
4. For the long-term, the bill will be hefty—just under $20 billion, by the government’s own estimation—but the programs’ immediate effects have looked good, and in D.C. that’s what counts.
One question now is Will they let the program die at the end of 2010? We can hope that the economy is strong enough by then that tax credits to spur along what is otherwise normal economic activity just won’t be necessary. But really, that won’t be the key consideration. If it’s still popular at home, and if it makes congress look good, the home-buyer tax credit will live on.
No related posts.
