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