Home buyer tax credit update
The "do I qualify" questions keep pouring in about the revised $8,000 tax credit for first-time home buyers and the new $6,500 credit for certain repeat buyers. Here, for instance. And here. And also here. I'm hearing many variations of the same questions, so let me sum them up for you:
Q. When do the new provisions -- the higher income limits and the repeat-buyer credit -- go into effect?
The IRS has weighed in on this one: for purchases made after Nov. 6. To get in before the credit program is due to expire, you'll need to sign a contract no later than April 30 and close on the deal no later than June 30.
Q. I qualify as a repeat buyer because I've owned my home at least five years, but I married more recently and my spouse would be considered a first-time buyer. Do we qualify for either credit if we buy a new place, or are we out of luck?
I couldn't tell from the legislation, so I called the IRS to find out. Spokesman Jim Dupree says the agency needs a bit more time to work through details like this one. "It's new legislation," he noted. "We should get some new guidance very soon -- any day now."
When it does, he said, it will update the agency website. The IRS answers questions about the older versions of the first-time buyer tax credit here, for instance. (One of its Q&As says a married couple can't get the first-timer credit unless both of them meet the requirements, even if they file separate tax returns.)
Q. I've been a homeowner for the last 10 years -- six years in my first home and four years in my current home. Do I qualify?
No. The legislation says individuals must have been in "the same residence" for "any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence."
Q. I don't want to buy a new home, but I've owned my current home for at least five years. Am I eligible for the $6,500?
Er -- you do realize this is a "home buyer tax credit," right?
On a non-Q&A note, I thought you'd be interested in what Kevin A. Hassett of the American Enterprise Institute for Public Policy Research had to say about the tax credit program:
"It's actually kind of insane that they have renewed it," he told me for today's story on the Baltimore-area housing market.
Hassett, whose conservative-leaning think tank promotes free enterprise, thinks it's a bad idea for several reasons:
--Fraud. Tens of thousands of people got the money even though they didn't qualify as first-time buyers, weren't buying anything, weren't old enough to go to grade school, etc. The new provisions require that buyers attach their settlement statements to the tax form to prove they made a purchase, but Hassett doesn't see how this will do anything about repeat buyers getting the $8,000 meant for first-timers.
--What happens when the credits end? "We're pulling activity into today from the future," he said. "Tomorrow, we're going to have to pay."
--Tax dollars for some. "We're taking money from people who earn it and giving it to people who are claiming that they bought a house," he said. "I think that that kind of moving money around, it's the height of big government hubris. ... It's not the government's $8,000 that they're mailing to these people. It's your $8,000."
There's been a lot of discussion, including among you Wonk readers, about whether the credits are a good idea. As of last night, 50 percent of you had given them a thumbs down in this Wonk poll, 46 percent said thumbs up and the rest offered a thumbs sideways.
The thumbs-down sentiment isn't all anti-credit -- some of it comes from readers frustrated that they don't qualify. Wonk reader Sean wrote, "Unbelievable - my wife and I upgraded to a larger home (expecting a child), had to rent our condo due to market conditions, bought a new house 4 weeks ago and have already sunk upgrade dollars into it. We are exactly the type of couple who are helping grow the local economy yet stand to gain absolutely nothing since this is not retro-active. Very glad to see my tax dollars benefit everyone else."
Caro, a reader in favor of the credits, weighed in with this comment: "I think the idea is to reduce the inventory of homes for sale so that our home values can stop dropping so fast. It is better to give a tax credit to home buyers, rather than more bailouts for Wall Street and the banking industry."
And semiconscious is in the no-thanks category: "Everyone should stop and pause to think where this money comes from. The most insidious tax is the tax of inflation. It erodes the purchasing power of fix income individuals, and benefits the banks who are closest to the Fed spigot of free money. This bill is another government step to prop up the banks whose balance sheets are fairy tales."
What's your opinion?