If you are one of the many people who want to buy a home but just can't close prior to December 1, 2009, then you are in luck. Congress has finally extended the first time home buyer tax credit into 2010. Obama is expected to sign the bill into law today.
The first time home buyer tax credit extension allows a buyer to enter an agreement with a seller by April 30, 2010 and close on the house by the end of June 30, 2010. First time home buyers are defined as anyone who has not owned a home for the past 3 years. First time home buyers will get an $8,000 tax credit, similar to the tax credit for much of 2009. Other home buyers, who have owned their current home for at least five years, are eligible for a $6,500 tax credit.
Income limitations have been increased to $125,000 for single filers and $225,000 for joint filers. The purchase price of the home must be less than $800,000. The estimated loss in tax revenue to the government comes to $10.8 billion.
“The substantial rise in home sales we’ve seen over the past few months proves that the tax credit is working and is being used by buyers who were waiting for the right opportunity to get into the market,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Real Estate in Dallas-Fort Worth. “This important incentive is helping to stabilize the housing market, stimulate the economy and create new jobs in communities all across our great nation. Extending and expanding the home buyer tax credit will enable even more families to take advantage of current low interest rates and affordable prices to invest in their future through homeownership.”
Increasing the tax credit to so many home buyers, the credit has a greater chance of artificially increasing home prices through the end of the credit. However, even with that risk, there was wide support for the tax credit extension. As a home buyer, be prepared to negotiate as if you are not eligible for the tax credit. Sellers might need to be reminded a tax credit is not a reason to increase their price, but a chance to sell their home at a fair market value.