If you missed your chance to reap the benefits of the first-time homebuyer tax credit this past year, you will get one more shot. The Senate passed a bill on Thursday 98 to 0 that will extend the original first time homebuyer tax credit for another seven months and expand the bill to benefit some current homeowners looking to buy a new home. The bill should reach the House floor by next Thursday and then require the signature of the President.
So what does this new bill consist of? Well, for starters, contrary to many of the proposed bills, this bill does not increase the amount of tax credit. It remains $8000 for first time homebuyers. However this time around, if you are currently a homeowner that has owned your home for at least five consecutive years, you are eligible to receive a $6500 tax credit if you buy a new primary home. In other words, if you are buying a 2nd home you will not get a tax credit, but if you looking to move and buy a new primary residence, you might be eligible.
Who is eligible? Obviously first time homebuyers, and as previously mentioned, folks that have owned a home for at least five consecutive years. But the bill limits the purchase price of the home to $800,000 and there are income caps, which disqualify any individual who makes more that $125,000 annually and couples who make more than $225,000. In addition, this tax credit offer won’t last as long the second time around. One must sign a contract by April 30 2010, and close on the home by June 30th to qualify. And if you think they will probably end up extending the offer even further, think again.
According to Dina ElBoghdady of the Washington Post reported that Sen. Johnny Isakson (R-GA), “a longtime advocate of the tax credit, praised passage of the bill in his chamber but said the extension would be the last one. “Tax credits like this only work by creating the sense of urgency to take advantage of them”. So if you are considering buying a home and are eligible for the tax credit, you better get a move on.
But will this extension of the tax credit really stimulate more home sales? Stephen Ohlemacher of the Associated Press reported that there are those like Senator Kit Bond (R-MO) who question its effectiveness. “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,” Bond said. “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”. Though there may be plenty of truth to that statement, it seems that at this point there is nothing else that can be done to at least try and stimulate home buying. And the 98-0 vote in favor of the bill confirms that our Senators don’t think there is anything else that can be done either.