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Congress passes $8000 home buyer tax credit extension & expands income limits

 

Major news out of Congress.  Today, the House voted 403-12 in favor of extending and expanding the $8000 first time buyer tax credit after the Senate did the same yesterday by a vote of 98-0.  The president is scheduled to sign the bill (which also includes provisions to extend unemployment benefits) tomorrow morning to officially make it law. (Update Nov 6: It was signed by President Obama today, officially making it law).

Details of the Expanded Tax Credit

Initially scheduled to expire on December 1, 2009, the credit will now be extended to May 1, 2010 (and 60 days further for you to close if a property is under contract by May 1).  There are also some significant changes to this new tax credit that should allow many more buyers to qualify for it. 

Key elements of the extension:

  • Credit available for purchases before May 1, 2010. Prospective purchasers with binding contracts in place as of April 30, 2010 will be allowed an additional 60 days to complete the transaction.
  • Credit remains at $8000 for first-time purchasers. No change to definition of first-time purchaser. 
  • New $6500 tax credit for repeat buyers who purchase between December 1, 2009 and May 1, 2010. Repeat buyers must have lived in their homes consecutively for 5 of the previous 8 years. 
  • Income limits are expanded to $125,000 on a single return and $225,000 on a joint return. Current law $20,000 phase-out retained. 
  • New anti-fraud limitations are imposed.

Besides than the dates of eligibility being extended, there are some major changes to the $8,000 homebuyer tax credit that could have a large impact on the Massachusetts and Boston real estate market.

First of which, and most relevant to the Boston area given our higher home prices, is the increase in income limits to qualify for the credit.  Previous limits were $75,000 (single) and $150,000 (married).  The new limits are now increased by more than 50% to $125,000 (single) and $225,000 (married). 

Second, a new $6,500 tax credit is available to so called "move-up" buyers.  Not just first time buyers are eligible for the tax credit, now those buyers who have owned and lived in their current home for more than 5 consecutive years (out of the past 8 years) are eligible if they move and buy a new home.

These two huge provisions open up the homebuyer tax credit to hundreds of thousands of potential buyers in the Boston real estate market.  We've seen the MAJOR effects of the first time home buyer tax credit throughout the country, especially in less expensive areas where you can actually buy most homes on $75,000 annual income (unlike Boston).  I suspect we'll see a much larger impact in the Boston real estate market from this new credit expansion than we saw with the original version.

How does the new tax credit differ from the old?

From the National Association of Realtors, here is a direct comparison chart highlighting the changes in the new homebuyer tax credit compared to the previous version:


Expanded $8000 home buyer tax credit details

If you have any questions, don't hesistate to contact me or comment below!

 

 

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Comments

I bought my house Sep 08 and took the $7500 loan, any idea if the repayment plan still stands. If it does that's rather crummy....how come congress can throw money out now but is making the few that took the credit last year pay it back.
Posted @ Saturday, November 07, 2009 8:39 PM by wendy r
I think it is outrageous that Congress expanded the bill to include "step up" buyers who are already in houses, yet still unfairly expects 2008 buyers to repay the $7500.  
 
 
 
Those buyers answered the first call for help from the White House and Congress, and stepped into the market at an uncertain time. People who held out get $500 more, and don't have to pay it back. How did Congress miss so badly with their third chance at making this right? 
 
 
 
Michael, is there a petition, forum, or some meaningful means of expressing our dissatisfaction and affecting change on this issue?
Posted @ Monday, November 09, 2009 2:35 PM by David C
I'm in the same boat as these people, except I closed on December 31, 2008. ONE DAY AWAY!! I was getting terrible advice apparantly. Let us know when something happens on the 7500 repayment getting repealed. Thanks
Posted @ Wednesday, November 11, 2009 4:21 PM by Curry
Sorry for the delay - I'm in San Diego at the Realtor convention and haven't had a ton of time to respond! 
 
As for changes to the $7500 credit (the version that must be paid back), I have not heard of any changes to it or seen any interest in Congress to revisit that credit. I assume the feeling is that it will add too much cost to the stimulus package(s) overall and it wouldn't add any "stimulus" moving forward. It does completely suck (excuse my language!) if you're stuck with the credit that must be repaid so I feel for you. The best thing you can do is call or write to your Congressmen and Senators and ask them to revisit the issue - our system of government works best when the people in government hear from the public....often! 
 
Posted @ Wednesday, November 11, 2009 8:19 PM by Michael DiMella
I have seen to attempt at changing the $7500 credit which amounted to an interest free loan payable at $500 a year over 15 years (or until you sell the home) 
 
 
 
The credit was a good deal for anyone who wished to take advantage of it. The following year a better deal came along. 
 
 
 
If you took the credit and were happy with it at the time, PLEASE don't complain about not getting in on the $8000 credit which does not require repayment.
Posted @ Thursday, November 19, 2009 1:53 PM by Mark Hesseltine
If I closed on a home in September 2009, which income limit am I held to?
Posted @ Tuesday, November 24, 2009 11:20 AM by MP
The new credit was enacted on November 6th, so you would fall under the previous income limits as far as I can tell. I'm not an accountant though, so I would certainly check with an accountant to verify that for your particular circumstance.
Posted @ Tuesday, November 24, 2009 11:36 AM by Michael DiMella
I bought a home and closed on it on Jan. 7th 2009. I was told that I would still have to repay even though the IRS website says that if the house was bought after Jan.1st 2009, I would not have to repay the loan. I can't seem to get a good answer.
Posted @ Monday, January 25, 2010 4:39 PM by Danielle
Danielle - I'm not an accountant but as far as I understand it,if you closed in 2009, the tax credit does not have to be repaid. 
 
Posted @ Monday, January 25, 2010 5:01 PM by Michael DiMella
I closed on my home in October of 2008 and took the $7500 repayable loan. Yes, it helped, but am suffering from unfair situation (details of which are not relevant to topic at hand)and currently am unable to make house notes. But I will go straight to my point. I think it would be fair for those who took the $7500 loan, to be able to then claim the $8000 tax credit and use it as they wish, even if it is to pay back the $7500 loan. Sounds like a win, win to me. Would stimulate the economy from my viewpoint. Comments and questions welcomed.
Posted @ Monday, December 13, 2010 9:05 PM by Pat Washington
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