FTHB Tax Credit Extended & Expanded Today
It’s been on the hearts and minds of many as we draw closer to the end of November deadline for the current First Time Home Buyer Tax Credit. Would the tax credit be extended, would it be expanded, should I wait and hope that it’s better later… All of these are questions that I have heard in the past few months as first time buyers scramble to put a plan in place to get across the finish line on their home purchase to take advantage of this program.
Before we get into the nittygritty of the program, I think it’s important to point out that this program does not, in my opinion, put people into homes that they can’t afford. I believe that some commentators have made this leap in logic to get attention for themselves, their opinions, or their websites despite the fact that there seems to be no merit to the claim. The tax credit is just that… a tax credit. It has no bearing on the buyers qualification in the eyes of the lender or underwriter and is not something that will directly increase their purchasing power. This is not to say that there are not unscrupulous buyers and lenders in the world that continue to try to play the system, but I think trying to blame the tax credit is a joke. What the tax credit DOES do is pull FIRST TIME buyers (and now existing home owners) into the market and off the fence. If you’re sitting on the couch thinking you should probably consider buying a house sometime in the next year or so, this credit has proven to be a strong incentive to get people moving forward and off the sidelines.
Now, let’s get into the heart of what happened today. As of yesterday the House and Senate had sent the bill to extend jobless benefits (which includes the home buyer tax credit) up to the White House. Earlier today, President Obama signed the bill into law. The tax credit measures within this bill, now law, extend the credit through April 30, 2010. Qualifying purchases must occur on or after January 1, 2009 and on or before April 30, 2010. One new caveat is that in cases where a binding sales contract is signed by April 30, 2010, and the home purchase is completed prior to June 30, 2010 will also qualify. Raise your hand if you think that last part might get ugly… Of course there are income limits. Previously these were $75,000 for single taxpayers and $150,000 for those married filing jointly. For sales occuring after November 6, 2009 those limits have been raised to $125,000 and $225,000 respectively. One item that has not changed, the $8000 tax credit is reserved for first time home buyers.
The ray of sunshine for existing home owners that want to/need to make a move is that an expansion of the tax credit has been created just for them. A $6500 tax credit will be available for existing home owners purchasing a principal residence after November 6, 2009 and on or before April 30, 2010, or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010. (The more I type that last part the uglier it gets). You qualify if you have owned and resided in a home for at least five consecutive years of the eight years prior to your purchase date. The income limits are the same as above, $125,000 for single tax payers, $225,000 for those married filing jointly.
In both instances, the tax credit amount is calculated to be 10% of the purchase price up to $8000 or $6500 respectively. Depending on your market… it’s probably going to be hard to get anything less than the max. Not many homes available in the Treasure Valley in the sub $80,000 price point. The tax credit continues to be “refundable” as in even if the tax payer has no federal tax liability they can claim the credit and will receive a check for the rebate. For complete details check out the Federal Housing Tax Credit official website.
Hopefully the expansion of the tax credit will continue to improve market activity for homes in higher price points, typically outside the buying power of many first time buyers. So, if you are considering up-sizing, downsizing, first time buying or anything in between give me a call and let’s get the process started. April 30 will be here before you know it. Don’t wait to the last minute and miss out on a golden opportunity!
