The U. S. Congress has passed a bill that both extends the sunset date and expands provisions of what has been known as the “First Time Home Buyer Tax Credit.” Due to expire on November 30, 2009, the $8,000 Federal tax credit has been extended to April 30, 2010 and various provisions affecting eligibility have been updated.
The new version has been joined by another Federal tax credit of $6,500 which is available to current home owners who have resided in a home they have sold, or are in the process of selling a home in which they have lived, for five consecutive years of the previous eight years.
“The term ‘first time home buyer’ is actually somewhat misleading,” said Hawaii Association of Realtors First Vice President Berton Hamamoto, president and Principal Broker of Property Profiles. “A qualified home buyer is one who has not had an interest in a principal residence for the past three years prior to purchase. In other words, you could have owned something prior to that or even own an investment property now and still be eligible for the tax credit.
The $6,500 Federal tax credit was recently added to help stimulate repurchasing…current home owners who choose to sell and buy can now also get a tax credit. If potential home buyers have a binding contract on or before April 30, 2010, they will have until July 1 to close the transaction.”
Income limits for eligible repurchase home buyers are expanded to $125,000 for single buyers and $225,000 for couples. The purchase price of the home cannot exceed $800,000. To help guard against fraud, buyers are required to attach documentation of purchase to their tax return.
“Realtors believe this action by Congress is a positive step toward sustained real estate recovery. The substantial rise in home sales we’ve seen over the past few months proves that the tax credit is working and is being used by buyers who were waiting for the right opportunity to get into the market,” Hamamoto said.
NAR economists estimate that the current tax credit has contributed approximately $22 billion to the general economy, and approximately 2 million people will take advantage of the tax credit this year. Extending and expanding the home buyer tax credit provides further incentive to potential buyers hoping to make a move while interest rates remain low and excellent buys are available as a result of short sales and foreclosures.
The National Association of Home Builders has also commended Congress for passing this legislation, stating that it will further stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories, and stabilizing home prices.
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.
Hamamoto, who is attending the National Association of Realtors 2009 Conference & Expo November 13 through 16 at the San Diego Convention Center, reports that the tax credit has been one of the main topics of discussion among industry leaders. “A compelling number of real estate professionals lobbied Congress and called, emailed, and wrote letters to their congressional representatives. Over 550,000 letters were sent to Congress and over 13,000 phone calls were made. We feel that this action was a very important factor in the decision Congress made to extend and amplify the legislation. It’s apparent that conference attendees have been re-energized by this success.”