Tax Credits Extended and Expanded

Great news for home buyers, and for sellers, in a struggling residential real estate market in Warren County and elsewhere.

After several weeks of discussion, Congress has today passed bill HR3548, which extends the existing $8,000 First Time Buyer Tax Credit through to next April, and adds a $6,500 Tax Credit for some existing owners buying another home. The White House has confirmed that the President will sign it into law tomorrow (Friday, November 6).

In both cases, the credit is only available for purchase of a primary residence. Qualifying income levels have also been increased.

Here are the details:

First Time Buyer Tax Credit
- tax credit is 10% of purchase price, maximum $8,000
- applies to buyers who have not owned a home in the previous 3 years

Current Home Owners
- tax credit is 10% of purchase price, maximum $6,500
- applies to buyers who currently own a home, and have lived in it for at least 5 of the previous 8 years as a principal residence
- existing home does not have to be sold, but the new purchase must be for the primary residence

For Both Credits
- maximum qualifying income levels are $125,000 for single tax filers, and $225,000 for joint filers
- for purchase of primary residence only (not a second home or investment property)
- maximum purchase price $800,000
- must have a ratified contract for purchase by April 30, 2010
- must settle on the purchase by June 30, 2010
- for members of the military serving outside the US for at least 90 days, the tax credits will extend a further 12 months to June 30, 2011
- improved powers to the IRS for investigating possible fraudulent claims

While I see a big incentive here for first time buyers (and relief for those who were under pressure to close their purchases by November 30 under the existing deadline), I'm not convinced of the need for the limited credit for some existing homeowners, who don't need an incentive to buy, but rather need to get their current home sold in order to be able to move on and buy again.

Still, we need every bit of help we can get to bring buyers off the fence and stimulate the current market, and this new legislation is excellent news.

First Time Buyer Tax Credit Deadline

Time is running out if you wish to take advantage of the $8,000 First Time Buyer Tax Credit. The purchase must be completed by November 30,
which leaves only 74 days - that's barely 10 weeks - to get your mortgage finance in order, find the right home, get an accepted contract, and settle on the purchase.

While there are moves among members of Congress and lobbyists to extend the Credit into next year, and even to increase its scope, there is also plenty of opposition to the idea - so nothing can be relied upon, and the only sure way is to make sure you buy by November 30.

Further details can be seen on my website at http://taxcredit.chrisonline.net/.

If you need assistance in finding a home in or around the Front Royal area, or just want to talk through the First Time Buyer Tax Credit, please give me a call on (540) 671-1367.

Tax Credit - Final Details (Apparently!)

After some confusion and mis-reporting, the final details of the new tax credit have been released. Note that although this is now the "agreed compromise" by all sides of Congress, it has yet to be finally voted on, and then signed off by the President.

If you want to read the full text of the official press release for the Stimulus Package, it is here (the part relating to the home buyer credit is on page 2): American Recovery & Reinvestment Act of 2009.

But in a nutshell, here are the basics - very different from the original broad-ranging $15k credit added to the bill by the Senate:

- a refundable tax credit of 10% of purchase price or $8,000, whichever is less (which I believe means that if the tax payer's tax liability is insufficient, then a refund will be issued for the balance)
- for first time home buyers only (defined as those who have not owned a home during the previous 3 years)
- purchases between January 1, 2009, and November 30, 2009
- NOT repayable unless home is sold within 3 years
- credit reduced for couples earning over $150k and single filers earning over $75k

Effectively, the existing $7,500 first time buyer credit (due to expire June 30) has been increased to $8,000, extended to November 30, and converted from a 15 year interst-free loan, into a genuine non-repayable credit (unless you sell within 3 years).

Personally, I don't think this is enough to provide the stimulus we were looking for in the housing market. But at least if a first time buyer wishes to take advantage, they now need to get off the fence. We will see . . .

New homebuyer tax credit cut in half

There is good news and bad news from the "compromise agreement" for the stimulus package finalized yesterday in Congress.

The good news - a tax credit for home buyers at 10% of purchase price is part of the package. The bad news - the $15,000 maximum proposed by the Senate has been reduced to $7,500. Better than a kick in the pants, but maybe not the jump start that we were hoping for.

This is NOT the $7,500 credit already in place from last year, due to expire this coming July 1. That was only for first time buyers, and was effectively a 15 year interest-free loan. This new credit will be available to all buyers of a primary residence, and will not be repayable unless the property is sold within 2 years. Full details should be available soon.