Home Building Articles
House Votes to Expand Homebuyer Tax Credit
November 05, 2009
Buying a home is about to get cheaper for a whole new crop of homebuyers — $6,500
First-time homebuyers have been getting tax credits of up to $8,000 since January
as part of the economic stimulus package enacted earlier this year. But with the
program scheduled to expire at the end of November, the House voted 403-12 Thursday
to extend and expand the tax credit to include many buyers who already own homes.
The Senate approved the measure Wednesday, and the White House said President Barack
Obama would sign it Friday.
Buyers who have owned their current homes at least five years would be eligible
for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned
a home in the last three years — would still get up to $8,000. To qualify, buyers
in both groups have to sign a purchase agreement by April 30, 2010, and close by
"This is probably the last extension," said Sen. Johnny Isakson, R-Ga., a former
real estate executive who championed the credits.
The homebuyers tax credit is one of two tax breaks totaling more than $21 billion
that was included in a bill extending unemployment benefits for those without a
job for more than a year. The other would let companies now losing money recoup
taxes they paid on profits earned in the previous five years.
"We are still in a world of economic hurt, and Congress must continue to act boldly
and creatively," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee.
"With the right mix of tax breaks and investments we will get through this recession
and get folks working again."
The real estate industry has been pushing to extend and expand the housing tax credit.
About 1.4 million first-time homebuyers have qualified for the credit through August.
The National Association of Realtors estimates that 350,000 of them would not have
purchased their homes without the credit.
Extending and expanding the tax credit for homebuyers is projected to cost the government
about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0
vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.
"For the vast majority of cases, the homebuyer tax credit amounted to a free gift
since it did not affect their decision to purchase a home," Bond said. "And for
the small minority of buyers whose decision was directly caused by the credit, this
raises the question of whether we are subsidizing buyers who may not have been able
to afford buying a home in the first place."
The credit is available for the purchase of principal homes costing $800,000 or
less, meaning vacation homes are ineligible. The credit would be phased out for
individuals with annual incomes above $125,000 and for joint filers with incomes
The credit would be extended an additional year, until June 30, 2011, for members
of the military serving outside the United States for at least 90 days.
Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.
The business tax break would allow money-losing companies to use current losses
to offset taxable profits earned in the previous five years, giving them refunds
of taxes paid in those years. Under current law, businesses with annual gross receipts
of more than $15 million can claim losses back only two years.
The tax break would help industries suffering losses in 2008 or 2009, including
retailers, homebuilders and newspapers. Congress included a scaled-back version
of the tax break — for companies with revenues of $15 million or less — in the economic
recovery package enacted in February. The new tax break would be available to companies
of any size, providing a quick source of cash.
The U.S Chamber of Commerce has been a big backer of the tax break for money-losing
"It frees up capital that they can use to maintain jobs and potentially even hire
new people as the economy returns," said Caroline Harris, senior tax counsel for
the U.S. Chamber of Commerce.
The tax breaks would be paid for largely by delaying a tax break for multinational
companies that pay foreign taxes. It was passed in 2004 and originally was to have
taken effect this year, but would now be delayed until 2018. The bill is H.R. 3548.
*Source: STEPHEN OHLEMACHER, Associated Press Writer, Washington