Tax
| Go to contract now to take advantage of the $8,000 Homebuyers Tax Credit |
| Published Wednesday, September 30, 2009 7:00 am |
The First-time Homebuyers Tax Credit is scheduled to expire on November 30. That means that buyers have to agree to terms soon to get contracts closed by then. The homebuyer incentive program has been one element in the government's effort to revive the country's distressed real estate market. The basic idea was to stimulate residential sales in order to reverse the wave of foreclosures that have helped drag the economy down. The Federal Reserve is (for now) leaving key interest rates untouched at historic lows, which has helped push mortgage rates below 5%.
Now may be the best time to purchase a first-time home for yourself or a family member since there is no guarantee that the credit will be extended, despite the mumblings in Congress. Many people are using the credit as motivation to pursue home ownership sooner rather than later; some are even putting off other expenses (including weddings) in order to afford the purchases now.
Realtors and home builders, along with many members of Congress, are pushing hard for an extension of the program. They argue that although the housing market has shown signs of recovery, it still needs the help. Strong bipartisan support exists in Congress for continuing the credit, with at least 20 proposed bills to extend and/or expand the credit. The bills appear to be stuck in committee as members are currently focusing on healthcare initiatives. One of the most recent bills, Senate Bill S1678, seeks to extend the credit for six months, through June 1, 2010 and makes no changes to the first-time homebuyer requirement or to income limits that currently exist. Another bill, Senate Bill S1230, seeks to increase the credit to $15,000 for any primary residence purchase, not just those made by first-time homebuyers.
Several of the smaller bills have been combined into the "Service Members Home Ownership Act of 2009" bill, which is supposed to have a floor vote this week. This incarnation seeks to correct an oversight in the original tax credit legislation: military, Foreign Service and intelligence agency personnel were unable to qualify for the credit if they were transferred overseas within the first three years of required residency, according to the law, or they would have to repay the $8,000 credit to the IRS.
The Congressional Budget Office estimates that the existing credit will cost the government about $14.7 billion over the next 10 years -- about twice as much as lawmakers anticipated when they included it in the economic stimulus legislation in February. According to the IRS, about 1.4 million people have already claimed the credit.
Will the credit be extended? There really is no way to know definitely before the existing credit expires on November 30. That means first-time homebuyers soon will enter an uncertain period in which they will not have enough time to close a sale by November 30, but won't be sure the tax credit will be available afterward. If you're not under contract by October 15th, you may miss out on the opportunity altogether.
Kevin E. Reynolds, CPA is a Partner in our Tax Services Department and is based in our Boca Raton office. With over 15 years of experience in public accounting, his goal is to help clients minimize their total tax liability and make financially sound, tax-savvy business decisions. Focusing on the real estate, health care and retirement plan industries, Kevin is able to provide expertise and guidance in addressing such complex issues as cost segregation, like-kind exchanges, mergers and acquisitions, and corporate structuring. As the firm's leader of the retirement plan advisory practice, he provides assistance in planning and structuring retirement plans, ensuring that the plans are designed for maximum tax advantage. Contact him directly via email at kreynolds@daszkalbolton.com or by phone at 561.953.1443.
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