Home Buying Tax Credit

Time is running out to take advantage of the home buying tax credit, which expires at the end of November. But a tentative agreement in the Senate may extend the deadline and expand the pool of eligible participants.



Right now, the tax credit deadline is Nov. 30, but that may soon change.



Under the existing plan, qualified first-time home buyers purchasing a principal residence on or after January 1, 2009, and before December 1, 2009, are eligible for a tax credit of up to $8,000.

Senators have reportedly reached an agreement to extend the deadline to April 30th and the credit would be expanded beyond first-time buyers to those who have lived in their home for five consecutive years. Repeat buyers would get a credit of $6,500 instead of $8,000. Closings must take place by June 30th.

Eligible individuals can make up to $125,000 a year and couples can earn up to $225,000 per year, which is higher than the current income limits of $75,000 and $150,000, respectively.

The tax-credit measure may be attached to a bill that would extend unemployment benefits, but it hasn’t yet passed the Senate… or the House.

The extension comes amidst a slew of stimulus proposals by Congress and the president, intended to prop up a slumping housing market, and the economy in general. The popular home buying tax credit spurred many purchasers to close the deal, and without it, legislators fear the real estate market could go back into free fall. According to the New York Times, this possibility is even more likely as the Federal Reserve may cease its buying of mortgage-backed securities, causing interest rates to possibly drift up to 6 percent, from 5 percent, turning off potential buyers.

Experts are predicting another chill in housing sales as winter approaches, despite gains this summer that many hoped were an indication of a turnaround. The NYT says defaults and distress sales are rising in the middle and upper price ranges, as the buyers out there look for bargains.

Reports show that the only hot sector of the real estate market has been – foreclosures.