$8K Still Available to New Homebuyers?

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To keep the mortgage market primed and pumping, Congress has laid out a few scenarios where the $8,000 new homebuyer tax credit will be extended.

What will that mean to homebuyers, the U.S. housing market and the economy? Let’s take a look.

The tax credit was OK'd earlier this year by Congress. In a nutshell, the deal applies to10% of the price of a home, up to $8,000. The tax credit model actually allows new homebuyers to take $8,000 off the price of a new home. Even if the homebuyer pays no taxes, he or she still gets a check for $8,000 from Uncle Sam. To get the credit, home buyers must put the $8,000 toward a primary residence. And it is only eligible to couples with an annual income of less than $150,000 (or less than $75,000 for individuals).

Unfortunately, the credit is due to expire on Nov. 30 – unless Congress can extend the deal.

But the momentum to extend the $8,000 new homebuyer’s tax credit is gathering steam, thanks to some powerful Washington pols. U.S. Sen. Harry Reid (D-Nev.), the Majority leader, has already called for the extension of the popular home tax credit (The Internal Revenue Service reports that 1.4 million Americans have already claimed the tax credit).

Of course, the U.S. housing industry is aggressively lobbying for an extension. If it goes away, housing and mortgage industry professionals say, the housing market, which has shown signs of recovering, will see significantly less activity without that $8,000 carrot dangling in front of homebuyers.

“Now is the time for Congress to keep this recovery going by extending the tax credit through 2010 and making it available to more homebuyers. We have all seen how the credit has been a spur to bring homebuyers into the market, and have seen the beginnings of a real recovery in the housing market. Housing has always led this nation out of economic downturns, and can do so again,” said National Association of Realtors President Charles McMillan.

The NAR even has a cookie-cutter letter that consumers can sign and send to Congress to push for the extension.

That message has gotten through to Washington. In September, Sen. Ben Cardin (D-Md.), Sen. John Ensign (R-Nev)., Sen. Reid, Sen. Johnny Isakson (R-Ga), and Sen. Debbie Stabenow (D-Mich) cosponsored a new bill that would extend the tax credit through May 2010.  Isakson, a former real estate agent, already has his own bill out on the docket that would enable all U.S. homebuyers to qualify for the credit.

A U.S. House bill would extend the program through the end of 2009.

The cost of the legislation could dampen prospects of passage. According to U.S. government statistics, Congress has already earmarked $14 billion toward the home tax credit program. Any extension would have to add billions more to the program.

According to the Web site ConsumerismCommentary.com, several initiatives are under review by Congress that would extend and recast the $8,000 new homebuyers tax credit.

  • Extending the deadline to May 30, 2010 or Nov. 30, 2010.
  • Expanding the credit to all home buyers rather than just those who have not owned a house in the past three years (otherwise known as “first-time” home buyers).
  • Increasing the credit from $8,000 to $15,000.
  • Eliminating the income cap for qualification of $75,000 (or $150,000 for married filers).

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