Home buyers win big with extension and expansion of federal tax credit

Tax credits for homebuyers were extended, and broadened, by Congress on Thursday.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the House voted 403-12 on House Resolution 3548, a measure that extended and expanded the tax credit to include many buyers who already own homes.

The Senate approved the measure Wednesday, and the White House said President Barack Obama would sign it Friday.

Through the bill, buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn’t owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.

About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

Terri Anderson, owner and broker in charge at Terri’s Team - Keller Williams of Anderson, said the 80 real estate agents working in the organization’s Anderson and Powdersville offices have reason to be excited about the legislation because of the domino effect it will have on home sales.

“The measure is good for several reasons,” Anderson said. “It extends the tax credit window for first-time buyers, and it adds the $6,500 credit for other buyers who don’t have to be first-timers, which means move-up buyers can get a tax credit, too.”

Anderson said the tax credit legislation, in her opinion, will continue to be a good thing for the economy.

“Sales picked up when they passed the first tax credit but tailed off again as buyers became wary as the tax credit deadline drew closer,” she said. “But I feel like it is really going to pick up now. This is a really good thing for the housing business, which bodes wellfor the economy.”

Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits, said, “This is probably the last extension.”

Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes.

While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.

“For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home,” Bond said. “And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place.”

Bruce Smith, chairman of the board of the Western Upstate Association of Realtors, said he did not know whether the cost of the legislation would justify the rising price tag.

“The realtor community hopes it helps people get in homes, which is what our profession is all about - helping people live the American dream through homeownership,” he said. “For the first time in several years, it is a buyer’s market.”

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, said, “We are still in a world of economic hurt, and Congress must continue to act boldly and creatively. With the right mix of tax breaks and investments we will get through this recession and get folks working again.”

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.

Independent Mail reporter Rick Spruill contributed to this story.