No Increase, but Congress to Extend $8000 First-time Home Buyer Tax Credit into 2010 and Make Available to More Home Buyers and Owners

[Updated Nov] – See this post for details on the home buyer credit extenstion approval and new provisions: 2010 First-Time Homebuyer Tax Credit Extension Approved and Expanded to Existing Home Owners. New Provisions Not Retroactive

A number of would-be home buyers and the real estate industry are anxiously wondering if Congress will extend the $8000 new home buyer credit expiring on Nov. 30. I have been covering this credit in a few other posts, and today news reports say that Senate leaders have tentatively agreed to a plan (bill) to extend, but gradually reduce the $8,000 first home buyer tax credit through 2010. Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus of Montana, both Democrats, may seek to add the home buyers extension to legislation extending unemployment benefits and small business tax breaks that may be debated as early as this week, according to Regan Lachapelle, an aide to Reid.

The proposed (democrat sponsored) bill to extend the credit contains the following new provisions: (see this post for details on the existing home buyer tax credit)

  • First-time home buyers who close before April 1 would get the full $8,000, and the credit’s value would be reduced by $2,000 in each successive quarter until expiring at the end of the year.
  • The plan would extend the credit, due to expire Nov. 30, to home purchases under contract by April 30, 2010, with borrowers allowed another 60 days to close the sale, according to a person familiar with the details of the agreement.

  • Homeowners buying a new property could qualify for a $6,500 credit if they have lived in their previous residence for five years

  • The home buyers’ credit would be available to individuals earning up to $125,000, or $250,000 for couples, up from $75,000 for individuals and $150,000 for couples under the current law.

More than 1.2 million borrowers have claimed almost $8.5 billion of the $13.6 billion set aside for “first-time” home buyer tax credits this year. The program is aimed at easing the worst housing slump since the Great Depression and has been credited with boosting the economy and stock markets over summer.

Lawmakers are under pressure from real estate agents, mortgage brokers and home builders to extend the $8,000 credit before it expires Nov. 30. However, they are also facing pressure from governance groups and recent IRS reports claiming widespread fraud around claims for this lucrative credit. The IRS has identified 73,799 claims totaling almost $504 million that may not be from first-time home buyers. They also found that 582 taxpayers under 18 years old and ineligible to buy a home claimed almost $4 million in credits.

The terms for extending the home buyer tax credit are still being negotiated in Congress and I will continue to update this article If you haven’t already, I encourage you to subscribe for free via Email (A confirmation email is sent to avoid spammers) or RSS to get the latest news.

Related housing and Stimulus posts:
~ $800/$400 Making Working Pay Tax Credit
~ Key Dates for Stimulus Payments
~ New 401k and IRA Contribution Limits for 2010
~ Getting the 2009 and 2010 $250 Social Security Payment
~ 10 Deadly Mistakes Buyers Make When Purchasing a Home and How to Avoid Them

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