House votes to expand home buyers’ tax credit hoping to stimulate the housing market even more in New Jersey and across the country.
Congress gave final approval Thursday to support the housing market by extending and expanding the First Time Home Buyer Tax Credit.
The bill, passed overwhelmingly by the House and headed to President Obama for his signature Friday, extends unemployment insurance benefits that were due to expire and renews an $8,000 tax credit for first-time home buyers, while also expanding it to cover many other home purchases.
Under the housing program, people buying a home for the first time in three years would receive an $8,000 tax credit if they sign a contract by April 30 and close by June 30. Homeowners who are buying a new primary residence would be eligible for a $6,500 tax credit beginning Dec. 1 if they owned their home for five consecutive years in the previous eight.
The timing is more flexible for military families who have been deployed overseas for 90 days or more in 2008 or 2009. They would have until April 30, 2011, to sign a contract.
To qualify, the home must be no more than $800,000. The program also restricts eligibility to individuals who make no more than $125,000 annually and couples who make more no more than $225,000. Anyone who collects the tax credit but sells the home within three years of buying it must return the refund.
The original tax credit, which was set to expire Nov. 30, has been credited with helping the housing market stabilize by coaxing new buyers into the market. But economists worry that the program distorts the market by artificially inflating home prices and are skeptical about whether the amount of additional economic activity is worth the cost. The program is estimated to cost $10.8 billion.
“The housing market is going to have to learn to stand on its own two feet,” MacGuineas said. “This could misdirect resources into the wrong place.”
“It’s not a stimulative measure,” said Kevin Hassett, director of economic policy at the American Enterprise Institute. “There has been this intuition people have that if you support demand for housing, then home prices will stop plummeting, and that might help stop the panic. But the panic stage seems to be over.”
The passage of the tax credit provision was a huge win for the real estate industry, which has been lobbying aggressively to extend and expand the program. Real estate trade groups say the credit has helped boost sales and clear out a glut of lower-priced homes, especially foreclosures. Ending it would be a blow to the housing market’s recovery.
The complete list of qualifying criteria is posted on theIRS website. Be sure to review it with a tax professional to determine your eligibility. Then mark your calendar for April 30, 2009.
To start the application process call me Jerry Santoro @ 866-970-3400 ext 310 or fill out a secure application.
