There are dozens of articles on this site about the Home Buyer Tax Credit. You can see them all here.
For the most recent news about the Home Buyer Tax credit, please see this article (July 2, 2010).
UPDATE Nov 6: According to UPI, President Obama has signed this legislation. NOW it’s official.
The extension of the existing $8,000 tax credit for first time homebuyers is now all but a done deal.
Moments ago, the House of Representatives passed HR 3548 ”“ The Unemployment Compensation Extension Act of 2009 with a vote of 403 -12.
“Whoa, hold on there Jay. You said the tax credit extension was passed. What’s up with linking to some unemployment legislation?”
That would be because the Senate attached an amendment (SA 2712, Section11) to HR 3548 that extends (and expands) the home buyer tax credit. The Senate passed the amended HR 3548 on Wednesday by a vote of 98 ”“ 0.
The bill now moves to President Obama’s desk for his signature into law. Some mainstream media is reporting the President will sign this on Friday, November 6. THEN, and only then, will the tax credit truly be extended and expanded (regardless of whatever you may read on Twitter, on blogs, and in the press).
So what’s in the bill?
Amendments are difficult to read as they cross-reference multiple documents and contain gobbledygook that looks like this:
(1) by striking “and” at the end of subparagraph (M),
(2) by striking the period at the end of subparagraph (N) and inserting “, and”, and
(3) by inserting after subparagraph (N) the following new subparagraph:
“(O) an omission of any increase required under section 36(f) with respect to the recapture of a credit allowed under section 36.”.
Good luck deciphering that”¦
Here’s what I’ve gleaned from reading the amendment, cross-referencing it, and digesting various media reports:
The “New” Home Buyer Tax Credit Details
- The existing $8,000 tax credit is extended to May 1, 2010. (The credit is for 10% of the home purchase price, up to $8,000.)
- If a home buyer is “into a written binding contract before May 1, 2010”, and they close on that contract before July 1, 2010, the tax credit can be claimed.
- A new tax credit for “long-time residents of same principal residence” has been created. This has been reported in many places as a tax credit for “move up buyers”. Here is the actual verbiage of the new tax credit for existing home owners:
EXCEPTION FOR LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE.–In the case of an individual (and, if married, such individual’s spouse) who has owned and used the same residence as such individual’s principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence.
- The tax credit for existing “long time resident” home owners purchasing a new home is 10% of the purchase price, up to $6,500.
- The old $8K credit had income limits of $75,000 for singles and $150,000 for married couples filing jointly. The income limits have been increased to $125,000 / $225,000.
- No credit shall be allowed for the purchase of any residence if the purchase price exceeds $800,000.
- All of this applies to primary residences only. No second home or investment properties are eligible for the tax credit.
- For members of the Armed Forces deployed on duty outside the United States, the tax credits are extended to May 1, 2011 (must close before July 1. 2011) Must be deployed outside the U.S. for at least 90 days between Dec 31, 2008 ”“ May 1, 2010.
- “Fraud prevention” measures have been implemented. The tax credit can not be claimed by anyone under 18 years of age (some knucklehead tried to put it on the tax return of a four year old). Also, a “properly executed copy of the settlement statement used to complete such purchase” must be attached to the tax return claiming the credit (I take this to mean a copy of the signed HUD-1 Settlement Statement. But check that with your tax advisor!)
That’s it in a nutshell.
Of interest: According to economists at Goldman Sachs, around 70% of all current homeowners would be eligible for the expanded home buyer tax credit. The NAR and other Realtor Associations will no doubt be salivating over the extension and expansion of the tax credit. Some Senators have said that the chances of the tax credit being extended again come next April 30 are virtually zero.
Personally, I’m not a fan of the tax credit extension. I realize that flies in the face of a large majority of my fellow real estate agent / broker brethren, but that’s how I feel. It’s going to cost a TON of money (almost $11 billion by some estimates), and I am far from convinced it encourages people to buy homes (and if it does, that’s one BAD reason to buy a home).
Disclosure: I am clearly not an elected politician and my interpretation of the legislative text could be incorrect. Also, I am not a lawyer nor a tax professional, nor do I have any desire to be either. You should seek their counsel.
AND DON’T FORGET!! Until President Obama signs this bill, it’s not in effect!
Sources:
HR 3548
SA 2712 (Sec 11 is the applicable section)
Associated Press: Congress set to expand homebuyer tax credit
Wall St Journal: Tax Credit Extension Would Keep Home Prices Up
CNN Money: Senate throws a lifeline to the jobless
National Association of Realtors, Government Affairs: Here is a GREAT summary of the current and proposed home buyer tax credits (PDF file).
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Great interpretation…all we need now is the signature!
FANTABULOUS! The post, I mean. I so enjoy the machete with which you slice through all of the BS. I agree with you about the credit. While I'd certainly claim it were I eligible (hey, I'm not a dum-dum) AND in the market for a home, I am skeptical about it. Yes, lots of people have claimed it. But, as you point out, it's a huge burden to our already-weighted-down budget. And I really wonder about the number of people — first time home buyers — who've used it. Would they REALLY not have bought a house if not for the credit? With mortgage rates as low as they are, not to mention the huge surplus of properties for sale, would that not have been enought? Has it really given the industry THAT much of a shot in the arm? But I ramble. Thank you, Jay, for cutting through the Congressional Crapola. 🙂
I have been frustrated the last few days on the focus of the home buyers credit extension and not the fact that this is tied to a much larger issue. Unemployment! This is the longest extension to unemployment benefits since the 1970's.
Crapola? In CONGRESS? Say it ain't so… 😉
Thanks for the update Jay – great way to break it down into something readable! I also am not a huge proponete of the extension. It has started to causes chaos in our market where we have people that really should not yet be in the market to purchase, yet are trying to do so just for some "money in their pocket". Deals are falling apart left and right as the deadline looms – resulting in some very unhappy sellers (and agents as well!). The market will correct itself given the chance and will do so more swiftly without this artificial inflation of numbers.
I'm not a fan of the tax credit, either. How do folks think it's "free" money? As you've stated before, in more ways than one, the cost to our kids and grand-kinds is going to be VERY high. Nice break-down, Jay.
That's a *great* point Cindy! I'll admit I haven't paid much attention to the unemployment extension specifics, but it is very significant. Kind of a statement of the overall condition of the economy… and it's not going to be cheap either….
You are now the "official" Home Buyer Tax Credit Extension Guru. Thank you for keeping us updated.
Lots of things going on. The unemployment extension is crazy – but I do know a lot of people out of work and that are still losing their jobs. I'm still unsure on the whole homebuyer tax credit, but my favorite part is the "long time resident" incentive, finally starting to reward existing homeowners, I wonder what this will do to listing inventories this winter season :)…
This is indeed good news for many. Thanks for sharing this. By the way, I know a real estate coach who could also help many in the real estate industry make money despite the current crisis.
Next breakdown of the facts. It's a burden for each of us to reconcile the ramifications of economic stimulus bucks. At the end of the day we all have opinions, but the long tug on the rope is what? What would each of us do to fix the stupid of the last eight years? I believe if we look inward and thank the deity of choice for the NEW BUSINESS this will bring to the economy, we'll see it's not a bad thing.
Great information! One of my buyers signed a contract yesterday (who needs to close asap because she sold her home) and I had enough foresight to use Dec 1 as the closing date. I hope she will be eligible for the credit – it's definitely worth trying to hold off closing a week for $6,500.As for the credit overall – I think it's a waste of money. I have many buyers and the credit is an afterthought to them.
It's official!
This is great news for my wife and I, as we are trying to close on a Short Sale upgrade.If I am reading this right, it looks like the $6,500 credit is effective immediately – Can anyone confirm this?THE DETAILS:The $6,500 credit is described in Paragraphs (b) and (c) of SEC. 11. EXTENSION AND MODIFICATION OF FIRST-TIME HOMEBUYER TAX CREDIT.http://www.govtrack.us/congress/billtext.xpd?bi…..And, if you read further, it enacts this new credit on signature in Paragraph (j)(1):(j) Effective Dates-(1) IN GENERAL- The amendments made by subsections (b), (c), (d), and (g) shall apply to residences purchased after the date of the enactment of this Act.(2) EXTENSIONS- The amendments made by subsections (a), (f), and (i) shall apply to residences purchased after November 30, 2009.It appears to be the $8,000 extension that goes into effect on Dec 1 (since the current one is still valid through the end of November) in paragraph (j)(2). This was described in SEC. 11, paragraph (a) and tied out in (j)(2).
Well Jay, the day has finally come. We knew it would somehow, but when was the question. I'm surprised at how quickly this moved, mainly because I expected them to drag it out to at least November 28. Nothing like a little suspense.You know my feeling on the tax credit, but I will be sending you some posts in the near future as I've had some time to digest some of my thoughts on the ramifications of the move-up part of the extension. I don't like what I see and when I break it down, I can only hope that I'm wrong. If not, things could get messy if we're not careful.Thanks for being one of the most outspoken people on your feelings about this. It's inspiring to guys like me who have a desire to speak up, even when we're bucking the trend.Hope you get some clips from CBS5.
Until the job market improves, I am not too excited about this latest fluff job, and I was not for the extension either.Sincerely appreciate the clarification/interpretation in your blog.
This is just one of the few things that the government should really focus but they should also look at some other issues and think of a long term solution not a patch on an existing hole.
Can anyone confirm if the $6,500 credit is effective immediately, or starting Dec 1? Also, if you buy in 2010 can you still apply the credit to an amended 2008 tax return?
sweet!
Nate – everything I'm reading and hearing says the $6500 credit was effective on the date of enactment (Nov 6). I'm 99% sure you could apply the credit for a home purchased in 2010 to your 2009 return. Haven't dug deep enough to see if you could amend 2008.
Just found this in the legislation:"(g) Election to Treat Purchase in Prior Year.–In the case of a purchase of a principal residence after December 31, 2008, a taxpayer may elect to treat such purchase as made on December 31 of the calendar year preceding such purchase for purposes of this section"My interpretation is the key words are "… of the calendar year PRECEDING such purchase…"To me, that means if you buy a home in 2009, you could amend your 2008 return. And if you buy a home in 2010, you could claim it (or amend) on your 2009 return. But you can't buy in 2010 and amend 2008 — that wouldn't be "the preceding year".But I'm no attorney / politician / CPA.
Yes, Senator Isakson's office confirmed to a journalist that the $6,500 credit was effective on the date of enactment (Nov 6). Sorry, but I can't find the link to that. Know that's what I read though…
Thanks Jay. You beat my realtor to the answer on this one 😛
Thanks for the post. I've been waiting to hear about the extension for a while…since we bought our home this summer. So does that mean people who bought a home in 2009, but before Nov. are out of luck? That's what it sounds like…
.-= Nicole´s last blog ..Christmas 2009 =-.
Nicole – this is an extension (and expansion) of the existing tax credit. If you qualified as a "first time buyer" under the existing credit, you're still qualified. But the $6500 credit for existing home buyers is new, and not retroactive.
Nice to see Obama is being progressive in helping the real estate market in the States, seems like it needs a little jolt. Jason
great..
.-= apply credit´s last blog ..Gas meter Prepayment gas meter =-.