New Home Buyer Tax Credit passes Congress

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Members of Congress seem to be holding their noses as they vote to extend the new homebuyers tax credit through April. The Senate overwhelmingly approved the $8,000 credit yesterday and the House followed suit today. But not without some whining -- or is that warning?

According to the Associated Press, Sen. Kit Bond, R-Mo., was among the skeptics.

"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 told the Associated Press. "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 extension is expected to cost $10.8 billion in lost taxes.

Bond's gripe has been a familiar refrain in Washington, ever since the benefit first was offered in February. Opposition mounted after the Department of Treasury released a report last week about fraudulent activities.

Not surprisingly, the beleaguered real estate industry disagreed and had lobbied hard for the extension, estimating that 350,000 of the 1.4 million first-time home buyers who qualified for the credit through August would not have bought homes otherwise.

One of the major concessions agreed on to get the bill passed was extending the credit to those who have bought their homes in the past five years.

Other details of the extension include:
  • It can only be used on homes that cost $800,000 or less.
  • It cannot be used on vacation homes.
  • Buyers' income cannot be higher than $125,000 for an individual or $225,000 for those filing jointly (an increase from the previous limits of $75,000 and $150,000).
  • Members of the military serving overseas for at least 90 days get an extra year, until June 30, 2011.

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