First-Time Home Buyer Tax Credit – What Do You Think?
Recent home buyers and current home hunters know all about the first-time home buyer’s credit. Individuals making less than $75,000 or married couples making less than $150,000 in adjusted gross income currently qualify for the full $8,000 tax credit with the purchase of a first home. You can claim part of the credit if your individual income is less than $90,000 or your joint income is less than $170,000. This program is set to expire on December 1, 2009 so you hunters out there are hopefully closing on a home soon.
But wait.
The federal government is trying to extend the program beyond its current expiration date in order to save the housing market and create thousands of jobs. The current terms may be updated to include existing homeowners as well. The credit amount would remain the same as this year – you receive a tax credit of 10% of the home price up to $8,000. And you don’t have to pay the money back!
Remember that credits aren’t deductions, so your tax liability will be reduced by $8,000 (assuming your home purchase price is over $80,000 and your income meets the IRS requirements). So this is truly a great deal if you’re thinking about buying a condo or house in the near future.
But wait again.
Critics of the proposed extension of the home-buyer’s credit say that the government is artificially “propping up” home values, which would immediately topple without the credit program. This means that you might buy a home sometime in the next year only to have your brand new rug pulled out from under you. If the home buyer’s credit program doesn’t accomplish what it’s meant to (which is to help save the real estate market from further value decline), you might lose way more than $8,000 in your home’s value. Another argument against extending the tax credit is the high cost of the program, which would be $15 to $17 billion dollars over six months!
I have several friends looking for their first place, and I hope they can take advantage of the $8,000 credit. Although it is kind of a bummer that only a small percentage of home buyers are able to take advantage of a program that’s funded by all taxpayers.
What are your thoughts on extending this tax credit program – good, bad, or ugly?
