It’s official. Today President Obama will sign a bill into law that extends the $8,000 First Time Home Buyers Tax Credit, recently set to expire on November 30, until April 30 next year. The tax credit, originally part of the American Recovery and Reinvestment Act of 2009 was intended to stimulate the real estate industry, and Congress has been talking about extending the credit for months.
1.8 million home buyers have qualified for the $8,000 first time home buyers tax credit so far or will qualify by the end of November. According to the National Association of Realtors (who have a vested interest in seeing the credit be extended and expanded) says 335,000 of those home buyers would not have purchased a new house if not for the credit.
With house prices still lower than their highs and not much activity in the market, the industry wants more stimulation. And the industry is getting more than the $8,000 stimulus. Formerly, the tax credit was available only to home buyers who hadn’t owned a house in the past three years. The new bill adds a $6,500 tax credit for current home owners who buy a new house, and who have lived in their current house for at least five years. The extensions comes at a cost of $10.8 billion over 10 years according to the Joint Committee on Taxation
In order to qualify for either credit, the purchase contracts need to be signed by April 30, 2010 and the closing must take place by June 30, 2010. The value of the purchased house must be less than $800,000. There is an income limitation as well, but it has been increased with the passing of this bill into law. If your adjusted gross income is above $125,000 (single filers) or $225,000 (joint filers), the maximum credit you are allowed to claim is phased out.