The U.S. Senate is working on a bill that would extend the first-time buyer home credit of $8,000 and add a new credit of $6,500 for homeowners who have lived in their current home for 5 years or more. The new provision, if enacted, would go into effect on December 1, 2009. The new bill is expected to cost upwards of $10 billion.
The tax credit has been an important driver of real estate transactions over the last quarter and one of the primary reasons that national real estate transaction volumes and prices have begun to show improvement. The new bill would extend these benefits — and add the new credit — for homes that go under contract as late as August 30, 2010.
The tax credit is disproportionately beneficial to the central Texas markets where real estate values remain moderate compared to major metropolitan areas in the East and West. It is also important to lower cost downtown condo units. The $8,000 credit represents 40% of a 10% deposit or 20% of a 20% deposit on a new $200,000 unit.
Here are additional details on the proposed tax credit extension:
– First-time home buyers are eligible for up to $8,000 on the tax credit, which is the same as the current credit. The Senate version of the bill creates a new credit of up to $6,500 for homeowners who have lived in their homes for five years.
-The credits expire on April 30, 2010, but home buyers under contract by April 30 would be able to qualify as long as they complete the sale within 60 days.
– This is the third and likely last version of the credit. The original credit became available in mid-2008.
– The tax credit isn’t available to everyone. It phases out for buyers with incomes above $125,000 for single filers and $225,000 for married couples and homes that cost more than $800,000 aren’t eligible.
– After 500 minors took advantage of the last credit, the new one is restricted to individuals 18 years of age or older.