This week, the Senate passed a bill that would extend the first time home buyers incentive program, as well as offering a different tax credit for existing homeowners.
The bill that was passed on Wednesday may give the first time homebuyers tax credit a second life, as it is currently set to expire on on December 01, 2009.
The Current 2009 tax credit, which does not need to be repaid, is only available to those who have not owned a home for at least three years and offers up to $8000 to those who qualify.
Under the new law, these benefits would not only be maintained, but also extended to those who have owned a home for five years or more. However, for existing homeowners, only $6500 would be available. Those buying a home would have until June to close on the home, but would have to have singed a sales agreement by April 2010.
In addition to addressing the housing market, the bill also includes provisions to federally fund unemployment benefits for an additional 20 weeks.
Of course, this bill has a long way to go before it becomes law, as it must still pass the House and then it must be signed by President Obama. This is also not the first bill aimed at extending the homeowners stimulus program, with a $15,000 tax credit for homeowners never gaining much momentum.
Before its passage in the Senate, Republicans had wanted to include a provision requiring that those on unemployment be checked using E-Verify, which is a an online service that checks immigration status, before receiving unemployment benefits. They also wanted the stimulus bill to include an amendment prohibiting Acorn from receiving federal aid.
Both of these requests were refuted by the Democratically held senate, but the bill still needs to be passed by the House, so there may still be more changes made to it.
The First Time Home Buyers tax credit provides an excellent incentive for new homeowners to take advantage of the extremely low home prices and interest rates being offered. However, there are less than two months left for new homeowners to take advantage of this tax credit, with the incentive program expiring on December 01, 2009.
The first time home buyers tax credit is part of a number of incentive programs designed to stimulate the US economy. Often dubbed the Obama Tax Credit or Obamas First Time Homebuyers Credit, what makes this tax credit unique is that it does not need to be paid back. Instead, the homeowner is given a check for up to $8,000 that can be used for whatever they want, providing the homeowner remains in the home for at least 3 years.
This amount of this tax credit is based off of 10% of the homes value, with a limit of $8,000. This means that any home priced below $80,000 will qualify for 10% of the homes value, while any home priced at or above $80,000 will qualify for $8,000.
One of the great things about this tax incentive is not just that it does not need to be repaid, but that it can be applied for on the 2008 tax return or the 2009 tax return. By claiming it on the 2008 tax return, it is possible to get the money early, by filing for an amended tax return. This is rather simple and involves submitting another IRS form 1040, as well as the required information for the First Time Home Buyers tax credit, tax form 5405.
Another option to receive the money early is to simply adjust the number of deductions claimed on your paycheck. So, for instance, if you normally claim 0, you could claim 2, so less money is taken out of your paycheck each week. However, when going this route, it is very important to keep track of how much money is being taken out, because if you exceed the first time home buyers tax credit, you will end up owing money to the IRS. After you have taken enough money out, it is also essential to switch your deductions back to normal.
It is very important to note, however, that if you owe any money to the IRS, this money will be deducted from the tax credit, with the balance returned to the customer.
Requirements for the First Time Home Buyers Tax Credit