First-time home buyer hurrying to close a real estate deal to get in on the home-buyer credit? Ease up on the ol' accelerator - the Senate recently passed a seven-month extension of the credit.
If you’re a first-time home buyer who’s been in a hurry to close a real estate deal to get in on the home-buyer credit, you can ease up on the accelerator. The Senate has recently passed a seven-month extension of the credit, which can save first-time buyers up to $8,000 on a new or existing home. The Senate also approved expanding the credit, starting December 1, for existing home buyers who trade up to a more expensive house, if they’ve lived in their present home for five years or more. Those buyers would be eligible for a tax break of up to $6,500.
The Senate action also increased the income threshold for eligibility. The credit will now phase out for couples with incomes over $255,000, almost $55,000 higher than the previous income limit. There are other eligibility requirements -- to get the tax credit, for example, home buyers will need to have a deal under contract by April 1. Even if the sale hasn’t closed by that date, however, a buyer would still have 60 days to complete the deal.
The Senate vote was a lopsided 85-2, but one of the senators who voted against the extension cited reports of fraud and abuse of the tax credit. At a recent Senate committee hearing, an IRS official testified that almost 100,000 claims worth close to $650 million had been paid to people who were not eligible for the credit. The most common reason for ineligibility was that the buyer had owned a home within the previous three years, but almost 600 claims were also paid to buyers under the age of 18, including one four-year-old.