Sat, October 24, 2009

First-Time Homebuyers Tax Credit Extension Proposals Gaining Ground

In the Senate, there are at least three different bills being put forth.  Senate Majority Leader Harry Reid of Nevada proposed this week a bill that would extend the $8,000 credit for four months and then phase the amount downward, dropping it to $6,000 in April, $4,000 in July, and $2,000 in October, with expiration at the end of 2010.  Another proposal would extend the current credit through June 2010, and a third would increase the credit to $15,000 and make it available to anyone buying a residence.

Meanwhile, in the House this week, Representatives Joe Courtney (D-CT) and Ken Calvert (R-CA) delivered a bipartisan letter signed by 165 members of the House of Representatives to Speaker Nancy Pelosi and Minority Leader John Boehner; the letter urges that the credit be extended.  It cites estimates that the tax credit generated as many as 400,000 additional home sales between February and September.

At the same time, the House Ways and Means committee recently heard testimony suggesting that fraudulent claims for the credits have cost as much as a half a billion dollars so far.  Phony claims have been detected from taxpayers who already own homes, people who didn’t actually buy homes, and folks who filed using their children’s names (in one case, a four-year old child) to get around income caps and first-time homebuyer requirements.  Although an extension seems likely, extension proponents will have to defuse criticism of these abuses and the IRS may have to build more safeguards into the credit-granting process before an extension is approved.

Although no one is saying it too loudly, there’s also concern that the end of the credit might result in a sudden downturn in home-buying.  For example, the September release of the Case-Shiller/S&P Housing Price Indices included a warning that “we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the Federal First-Time Buyer’s Tax Credit in November, anticipated higher unemployment rates and a possible increase in foreclosures.”

I’m guessing that no one in Congress wants to get blamed for a fresh downturn in the housing market.

So…if you’re fretting because you want to buy a house soon but fear you won’t be able to buy one soon enough to benefit from the homebuyer credit law, take heart.  There’s a decent chance that some form of the credit will exist in 2010.