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Congress Extends, Expands Home Buyer Tax Credit
Measure includes tax benefits that will help builders access capital
By Pat Curry, HouzingZone.com Contributing Editor
November 5, 2009
HousingZone
Less than four weeks before the first-time home buyer tax credit was set to expire, the House of Representatives today voted 403-12 to extend and expand the tax credit through April 30, 2010. The White House has indicated that President Barack Obama would sign the bill into law on Friday. The law will provide a tax credit of up to $8,000 for first-time home buyers and up to $6,500 for move-up buyers who sign a contract to buy a home on or before April 30, 2010. Move-up buyers are eligible if their principal residence for five of the last eight years, and complete the sale of their new home by June 30, 2010.
Impact of the expanded tax credit is expected to be significant.
“We’re going to sell a bunch of homes,” says Pat Neal, president of Bradenton, Fla.-based Neal Communities, who noted that the tax credit, combined with lower prices and historically low interest rates, make this a particularly good time to purchase a home.
The National Association of Home Builders, which lobbied extensively for the tax credit, forecasts that the extended and expanded tax credit will create 211,000 jobs and generate 180,000 additional home sales in the coming year. It is also expected to generate $9.6 billion in wage income and $6.9 billion in federal, state and local taxes.
"The tax credit has proven to be a powerful economic incentive,” NAHB Chairman Joe Robson, a home builder from Tulsa, Okla., said in a prepared statement. “Today's action by Congress will further stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories and stabilizing home prices."
The income limits for both first-time and move-up buyers would be increased to $125,000 for an individual and $225,000 for couples filing a joint return. The cost of the house can’t be more than $800,000.
Purchases made in 2010 could be claimed on the buyer’s 2009 tax return. Home buyers would not have to repay the credit as long as they live in the house for three years after the purchase date. There are exceptions for members of the military serving overseas.
Once the details of the measure were hammered out, Congress moved quickly to pass the bill. It was approved unanimously by the Senate on Wednesday and approved by the House today.
“It does make a difference,” says U.S. Rep. Vernon Buchanan (R-Fla.). “There’s a lot of inventory out there we need to absorb to get home builders back to work.”
Buchanan didn’t rule out the possibility of another tax credit when this one expires, but said he hoped this measure would be enough to make a difference.
He also called attention to another provision of the law, which provides broader tax benefits for businesses with net operating losses (NOLs) to recapture tax dollars from previous years against 2009 losses.
“That’s gigantic for builders because they can’t get capital anywhere,” Buchanan says. “A lot of them made a lot of money through the 2004 to 2006 cycle. To be able to go back and capture that is huge. It could mean a million dollars to a builder.”
In his prepared statement, Robson noted that the new NOL rules could make a tremendous difference for home builders running out of cash to operate their companies. “The new NOL rules will throw a lifeline to struggling businesses,” Robson said, “allowing them to continue making payrolls, paying business loans and otherwise keep their doors open until the economic recovery takes hold."
© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.