Senators Agree To Extend First Time Homebuyer Tax Credit And Allow Up To $6500 Tax Credit For Current Homeowners

For some time we’ve been talking about the first time homebuyers tax credit that was passed as a part of the 2009 Economic Stimulus Package. As we mentioned a short time ago, if you haven’t already put in a contract on a house and set up your closing for before November 30th, you most likely are already too late to receive the original first time homebuyer check.

This week there has been some movement on talks for extending the current tax credit out until next year, and then making a new provision that would allow  current homeowners to take advantage as well – to the tune of a $6500 tax credit.  The cost of the tax credits? Somewhere in the ballpark of $10.8 billion.

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Extension Of The $8000 Tax Credit

The current first time homebuyer tax credit is going to be running out on November 20th, 2009.  Many feel that it has had a positive stimulative effect on our economy, and they would like to keep the train rolling.  Now there is some indication that they may get their wish. The New York Times reports that Senators from both parties have reached an agreement to extend the tax credit:

Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.

The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said Wednesday that new home sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.

Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev…..

If the Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have also said they support extending the tax credit for homebuyers.

So they hope to extend the current $8000 tax credit for first time buyers, while at the same time offering  a new tax credit for current homebuyers of $6500.    Some provisions of the new bill:

  • The credit is available for homes that go under contract by April 30, 2010 and close within 60 days after that.
  • It will be attached to a bill to extend unemployment benefits.  (NOW PASSED!)
  • First-time buyers (those who have not owned a home for three years) can continue to claim an $8,000 credit.
  • Income limits: $125,000 a year for individuals, $225,000 a year for married couples. (higher limits than before)
  • Homes that cost more than $800,000 aren’t eligible for the credit.
  • You must be 18 years old to claim the credit.
  • Credit is available for primary residences only (no vacation homes)
  • The proposal will include anti-fraud measures, including minimum age requirements and additional authorities for the IRS.  (there have been problems for the current credit with fraud.)

New $6500 Homebuyer Tax Credit For Current Homeowners (Not Retroactive)

In addition to extending the current credit and adding some new anti-fraud measures, the new bill would update the tax credit to include “move-up buyers”, in other words, people who already own a home. This is certainly going to be popular with a lot of people that were holding off upgrading their home because they weren’t included in the credit previously.

So what criteria do current homeowners have to meet to get the $6500 credit?

  • The credit is available for homes that go under contract by April 30, 2010 and close within 60 days after that.
  • Current homeowners can claim a $6,500 credit as long as the property they are vacating has been their primary residence for at least five consecutive years out of the last eight.
  • Income limits: $125,000 a year for individuals, $225,000 a year for married couples. (higher limits than before)
  • Homes that cost more than $800,000 aren’t eligible for the credit.
  • $6500 tax credit is not retroactive.  (from the language of the bill: “shall apply to residences purchased after the date of the enactment of this Act.”

Since my wife and I have only owned our  home for 3 years, we wouldn’t be eligible.   That’s all right, our current home will do just fine for a few more years.

Update:  11/5/2009 – The bill has passed both the house and the senate.  Now it only needs the president’s signature.

Are you considering becoming a first time homebuyer, or upgrading your current  home because of the tax credit?   Do you think that the credit will artificially re-inflate the real estate bubble? Is the credit a good idea to begin with?

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Last Edited: 6th November 2009

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Comments

    Share Your Thoughts:

  1. David Dzidzikashvili says

    Intervention never works (could have positive short term effects), but during times of crisis any government faces tough pressure from the public to do something. Even if doing something won’t yield any positive results at least it gives a politician good argument that they are trying to fight for the people.

    Right now not many tools & methods are left in the governments hands and we are not hearing any new ideas, so same old approach.

  2. Jeff says

    It’s frustrating because now the latest is there will also be a $6500 credit to people buying but have been in their current home at least 5 years. My wife bought in 2005,we met in 2007,married in 2008 and bought a home (my first) in April 2009. This leaves us out of any possible credit,never mind the fact that since we purchased our house we spent $6000 for a new roof,$2000 for a riding mower…etc..etc..we helped stimulate economy but yet the govt.won’t help us. How sad.

  3. says

    As someone who is going to be purchasing a first home in the very near future, this is nice. As someone who understands that government spending for “economic stimulus,” this is ridiculous! I get so tired of the government doing me favors. The reality is that, if you weren’t planning on buying a house without the credit, you shouldn’t be buying one with it anyway. Just my two cents here.
    Branden @ FaithFitnessFinance´s last post ..If only I had more time…

  4. Alan says

    My wife and I are currently building a new home, and set to close on November 13th. WE lived in our precious home 6.5 years, and went in contract on the new build in June. We have being living with the in-laws awaiting the house to complete. I have contacted the builder, and they advised that they will extend the closing on the home for 30 days for $1200.00. My wife meet all the criteria for the stupulations I have seen for the $6500.00 tax credit.

    I wanted to get others thoughts. IS there a chance that this bill will be signed by the 13th, and put in motion immediatly? I am sure there are thousands of consumers like my wife and I. I can see a log jam of closing waiting for December 1, 2009?

    What are your thoughts on my situation?

  5. Jeff says

    Timing is everything I guess. I still say that in situations like ours where I’ve NEVER owned a home until this year,they should make it so the married couple could get 1/2 the credit even if one spouse previously owned or moved in last 5 yrs. I’m not holding my breath ,that’s for sure.

  6. Mike says

    The government doesn’t have money, they are merely a funnel for the money they collect, and of course, the Fed’s injections. So the tax credit, or government help, as some put it, is nothing more than wealth reallocation and inflation on our dollars. Seems like a complete waste for the short term gain of “stimulating our economy” at the expense of others and our future.

    You wouldn’t ask your neighbors to pay for your new flat-screen TV, and you presumably wouldn’t put it on a credit card without the money in hand to pay it off, so why would anyone advocate this?

    Not to mention, if people *need* financial help from the government, they probably shouldn’t be buying a house. Regardless of whatever fringe benefits home-ownership might give them (extra room, a garage, a private yard, etc), renting (especially an apartment) is still a cheaper route to providing their basic housing needs.

  7. Jeff says

    I’ve paid taxes since 1974.I wouldn’t feel guilty in the least getting a
    home-buying credit. With the soon to be wording it appears we won’t though. We can’t count on social security to be there when we retire in 10-15 years. Medicare will be dipped into as well if this awful,socialist health care bill passes.
    Renting IS usually cheaper,but you don’t get the tax benefits. When I met my wife I was renting a 2br apt.for $975 a month. Our mortgage for our 2br home is $1081 a month…not a whole lot higher.
    I’m not saying we NEED help from the govt., we’re doing just fine without it,Praise God for His blessings! But ,if they offer it,especially with what we’ve paid in taxes for several decades,of course it would be nice to get. It just looks like it’s not meant to be with their oddball qualifications.

  8. Mike says

    I’m not saying don’t take it. If it’s already been voted into existence then the damage is already done, take the credit if you qualify.

    If I’d known this was coming up for vote though I would have certainly been on the phone with my reps, relaying my complete opposition to anymore handouts/wealth re-distribution schemes.

    Thanks for the story though, I read it here first ;)

    • says

      I had not heard that, it doesn’t sound right to me. The only thing I can find in reference to the credit being retroactive is in this post, which says:

      The provisions of the bill would not be retroactive and would not apply to those who file tax credit requests based on the original law

  9. John Stone says

    If this $6500 Tax Credit For Current Homeowners is signed in this month, but I already bough our second home about 3 months ago. Will I still qualified to get this tax credit?

    • says

      I don’t believe so, but I would definitely check once it is signed into law to make sure of the final wording of the bill. As it stands now I don’t think it’s retroactive.

  10. jason green says

    My wife and I are selling our home (which we have lived in for more than 10 years) with a closing on Dec. 3rd and are closing a new home on the same day. If the new $6,500 credit kicks off on Dec. 1 as written in the Senate bill, then would I be correct in believing that we will qualify for the credit as our closing will be after Dec. 1?

    As for the credit, I paid over $11,000 in federal taxes in 2008 and an equal amount in state and local taxes, and feel not a bit of guilt about getting $6,500 of that money back if the timing of our sale indeed qualifies.

    More importantly, I don’t think that the owner-operated home improvement company I will be giving that $6,500 to will feel any guilt about where it comes from, nor will the contractor supply stores he will be spending a good chunk of that money at complain.

  11. Nicole says

    This tax credit amendment is ridiculous. We purchased a home on November 2009 and took the $7500 tax credit. We spent over $9,000 remodeling our new home this year, and yet we have to pay this money back to the government over the next 15 years, while they are handing out free money to everyone else!!! Where is the help for those of us who are actually helping the economy? Buyers from last July 2009 to December 2009 are the only people in US History that have to pay back a tax credit!!! It makes me sick!

  12. Ben says

    I want to buy a second home. I bought in 2005. The bank wants my fiance’s name on the mortgage, not the title. She is a first time home owner. Can she benefit from the tax credit? Can I benefit from the credit? Do we both lose out?

  13. chad says

    Have a question sold my house in oct and closed on it oct. 20 (which we lived in for 10 years) will close on my new house in Dec. will i quailfy for the 6500.00?

    • says

      That depends on what the final bill says as far as eligibility, and whether you meet all the requirements. The house and senate have passed it, and now the president needs to sign it into law. They expect that to happen tomorrow.

      To answer your question as best i can, I believe the credit is not retroactive – so if you were to close on December 1st, and the bill passed on December 2nd, you wouldn’t get it. What I have heard is that – you would have to close at the earliest – on the first day after the bill is signed into law. If it is indeed signed into law tomorrow, I think if you close after the date the bill is signed, you’ll be eligible for the $6500.

  14. Jimmy says

    I closed loan a couple days ago and bought my first home but I had quickclaimed deeded my current home about 2-3 yrs ago from my moms name to mine since she is sick. So because I have owned it technicly within the 3 yrs and I havent actually owned it for a full 5 years and even though I am a first time homebuyer and never bought a home before I STILL DONT QUALIFY FOR THE TAX CREDIT?????????????

  15. Stephanie says

    We sold a home in April of this year. We had lived there more than 10 years. We are currently renting but plan to buy soon. Since our previous home was already sold, do we qualify?

  16. Chad says

    In regards to the $6500 credit, is the language of the bill: “shall apply to residences purchased after the date of the enactment of this Act.”
    based on the day the offer is accepted or the day you actually close on the house, sign, and take title.

  17. Cindy says

    Concerning the $6500 tax credit. This is my situation. I have a home on the market that I lived in for a little over 2 years. My fiance will be making settlement on his home this week that he has owned for 6 years. We are getting married on March 6, 2010. We are looking into buying a home before we get married. Most likely, the mortgage will be in my name since his credit score is lower. Will we be qualified for this credit?

    • says

      If you are putting the house in your name, and you have not lived in the house for 5 consecutive years out of the last 8, you would not qualify. You might want to see if your fiance can qualify for and put the home in his name to qualify for the credit. As always, you may want to consult an expert and/or call the IRS to confirm your exact situation.

  18. Lashawn says

    I sold my home in March of 2007 a home i lived in for 15 years. I moved with my mother to save money to purchase a new home. I close on a new home today. Would i qualify for the $6500.00.

    • says

      I believe you would qualify since you owned a home for 5 consecutive years out of the last 8, and because you closed on the new home after the date the legislation was signed – 11/6. Again, double check before you claim the credit, but I think you’ll probably qualify.

  19. Al Warner says

    Emapthy to those retroactive want- to- be, but, it will not happen. As Economics 101 explains it…. Government incentives and all other incentives are already priced into the transaction; conversely a no incentive contract is already priced in to the purchase as well. This may not be an itemization on the Closing Statement but it is there just as certain that supply and demand controls inventory and pricing.

  20. Billie says

    I bought my home off my uncle back in 2oo4 but didnt put in my name untill 2007 i think it was im i able to get the 6500 still

  21. Ray Lippitt says

    I sold a home a couple of years ago that we lived in for 15 years, and built a home that was closed on 2 months before we would I be Qualified for the new tax credit? We built a home and close on the loan in April of 2009. Would I qualify for the new tax credit

  22. GAIL S says

    In regards to the $6500.00 tax credit. I sold my first home of 13 yrs 4/28/2008. purchased/closed on my new home 10/29/2009. Am I understanding correct that I do not qualify becuase of 8dys!

  23. andy says

    my wife owned the home for more than five years. I moved in January of 05 and we got married in 08 we just sold our house on 2/5/10 and are buying a house this week both houses are set to close on April 1st. My question is do we qualify and how do we prove that i have lived there for 5 years, im not on the title or deed

  24. Rae says

    My husband and I are under contract on a home and due qualify for the $6500.00 tax credit. Our problem is that BOA is the lender currently handling the property as a short sale and we are hearing that they are taking as long as 9 months to process. BOA is not responding or answering Realtor calls concerning these properties so what happens if we do not close by June 30th? I feel that we are under contract and the rest is out of our control and we should be able to receive our tax credit. Your thought???

  25. glenda cook says

    i think and wish and hope the tax credit will be extended. why pull the rug out from under something that is helping for a change.,i am to close on a short sale buy june first but i dont no if i will be to late. this would help with repairs, please, please, extened this bill

  26. glenda cook says

    please extended the tax credit to home buyers, the bill the senaters passed is working and helpping the american people.

  27. gonzalo says

    I am a first time home buyer, escrow closed on the third week of October of 2010 do i qualify for the $8000.00.

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