The House of Representatives today joined the Senate in approving legislation that would expand and extend into next spring an $8000 tax credit for first-time homebuyers. The bill now goes to President Barack Obama for his signature. Existing home buyers will get $6500 home buyer tax credit.
The House passed the measure on a 403-12 vote. Yesterday, the Senate approved the homebuyer tax credit extension by a vote of 98-0.
The extension expands the pool of Americans eligible to receive the $8000 credit for the purchase of a first home. Under the new legislation, individuals making up to $125,000 per year, and couples earning as much as #$225,000 per year, may receive the new homebuyer tax credit. The limits set in the original legislation were $75,000 and $150,000, respectively. The $8000 credit is also available to former homeowners who have not owned a home for three years.
Another provision in the bill creates a new $6500 tax credit for purchasers of new or existing homes who have already owned a home for at least five years. Any purchaser who sells the home or ceases to use it as a primary residence within three years of purchase must repay the credit.
Since its inception as part of the stimulus package passed in February, more than 1.4 million Americans have taken advantage of the new homebuyer tax credit, at a cost to the treasury of about $10 billion, according to the Treasury Department. The National Association of Realtors estimates that 350,000 of these buyers would not have purchased their homes without the credit, which was set to expire on Nov. 30. The new law extends the credit to April 30 of next year; those who sign agreements of sale by that date will receive the credit if the sale closes by June 30.
The bill also extends unemployment benefits for an additional 14 weeks in all states, plus a further six-week extension for states where the unemployment rate tops 8.5 percent. The Labor Department estimates that 1.9 million Americans would exhaust their unemployment benefits by the end of the year without the extension.
The National Association of Home Builders praised the legislation in a news release issued today. "The tax credit has proven to be a powerful economic incentive," said NAHB Chairman Joe Robson. "Today’s action by Congress will further stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories and stabilizing home prices."
But some have questioned the credit's effectiveness as a driver of home purchases. Although he voted for the final bill, U.S. Sen Kit Bond (R-Mo.) said, "For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home. And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."
The Treasury Department estimates that the extended credit will cost an additional $10 billion. The cost of this and other tax breaks in the bill would be covered by further delaying the effective date of a tax credit for multinational companies that pay foreign taxes. Approved in 2004, the credit was to have taken effect this year; the bill pushes the implementation date back to 2018.
Written by Sandy Smith
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