No more extensions of tax credit for first-time home buyers

The provision that puts up to $8,000 in buyers’ pockets won’t be renewed a third time, industry leaders and lawmakers say.

By Lew Sichelman December 27, 2009

 

Reporting from Washington – Home buyers hoping to take advantage of a new or extended tax credit should not procrastinate: This third bite at the apple will be the last.

Proponents of the $8,000 credit for first-time buyers and the $6,500 credit for move-up buyers made it clear during the debate on Capitol Hill that the benefits would not be renewed when they expire. And a lobbyist for the National Assn. of Realtors confirmed that at the group’s annual convention last month.

Lawmakers “made us promise practically in blood that we would not come back” for another extension, Linda Goold, the Realtor group’s director of tax policy, told her members.

During the debate, Sen. Johnny Isakson (R-Ga.), a former real estate broker and a longtime proponent of the tax credit, promised his colleagues, “This is the last extension.”

And Senate Finance Committee Chairman Max Baucus (D-Mont.) said, “It is important that this tax credit does not become a permanent fixture of the tax code.”

As it stands now, buyers who meet the income eligibility requirements have until midnight April 30, 2010, to ink a deal and must close by midnight June 30 to qualify.

Congress enacted the original $7,500 first-time buyer credit as part of the Housing and Economic Recovery Act of 2008. But because the credit had to be paid back it was more like a no-interest loan than a true credit and there were relatively few takers.

So in the American Recovery and Reinvestment Act of 2009, lawmakers upped the ante to a maximum of $8,000 for new buyers who closed before Dec. 1. They also said the new credit need not be paid back unless the taxpayer moves out within the three-year period following the purchase.

This second attempt at stimulating sales worked so well that the housing lobby implored Congress to help keep the momentum going. So lawmakers extended the deadline for first-timers and added a “long-term resident” tax credit for repeat buyers who owned their current home for at least five consecutive years out of the last eight.

Incidentally, the credit is not a flat $8,000 for new buyers and $6,500 for repeat buyers. It is 10% of the purchase price up to those ceilings. There is no credit if the price of the house is above $800,000.

Advertisement