Homebuyer Tax Credit To Continue

This is good news for the housing market, because based on reports from the Census Bureau and the U.S. Department of Housing and Urban Development, sales have slipped slightly more than 3.5% during the month of September.

A number of industry groups, such as the National Association of Realtors and the Mortgage Bankers Association, which had been pushing very hard for the extension to be granted, feel that the drop in sales may have been directly related to potential buyers who feared missing out on the homebuyer tax credit.

The new terms of the bill also expand the income groups who are eligible to participate. Couples with incomes up to $225,000 and single people with incomes up to $125,000 would now be able to claim the tax credit. However, no one who purchased a home with a price above $800,000 would be granted the credit. Members of the military who have been overseas for at least 90 days during either 2008 or 2009 would be given a further extension of the tax credit until April 30, 2011.

Also, the compromise bill includes a measure designed to encourage current homeowners who have lived in their homes for at least five years to consider purchasing a new home. If they do, they will be granted a tax credit of $6,500. The only caveat for all receivers of the tax credit is that they must remain in their new homes for at least 3 years. This is designed to discourage speculators and investors from profiting from the tax credit.

The purpose of extending the home buyer tax credit is to help to continue the recovery in the housing market. The National Association of Realtors suggests that the homebuyer tax credit was directly responsible for generating at least 450,000 or the 1.2 million homes sales that were made this year. Those sales have so far used up $8.5 billion of the $13.6 billion that was reserved by the Treasury Department to fund the homebuyer tax credit.

The IRS has tacked some new rules onto the extension. Going forward, taxpayers who want to claim the credit will have to fill out a special form and send it in with their income tax returns. However, they don’t have to show any proof that they actually purchased a home.

These rules were added to prevent flagrant abuses, such as one noted by the Treasury Department, that showed more than 582 people under 18 years of age had received the home buyer tax credit. Of that group, one was only 4 years old. This last incident is odd for two reasons. One, the law disallows contracts signed by minors; and two, most 4 years olds have not yet learned to write.

While the home buyer tax credit seems to be worth extending, perhaps the rules to claim it need just a bit more tweaking.

Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.jablonrealestate.com