Committee proposes extending tax credit
A Senate committee on Wednesday reached an agreement regarding the first time home buyer tax credit. If they have their way, the first time home buyer tax credit wouldn’t be just for first-time home buyers anymore.
If lawmakers approve, the tax credit will be extended to people who have owned and lived in their houses for at least five years. Also, the credit was set to expire Nov. 30, but the proposal will extend it to April 2010.
Details on first time home buyer tax credit
I don’t know what they are going to call the first time home buyer tax credit once it’s not for first time home buyers anymore, but I do know that the credit will change from the original $8,000 to $6,500. Obviously, the first time home buyer tax credit does not put quick cash in the hands of people making the biggest purchase of their lives, but it does give them a $6,500 discount on what they owe the federal government.
So, potentially, if an individual or couple pays their taxes in full, they could get a check for $6,500 come tax time. But not just anyone. The credit will be available to couples making up to $250,000 per year or individuals who make $125,000 or less. Right now, couples making $150,00 per year or less and individuals with salaries of $75,000 or less are eligible for the first time home buyer tax credit.
My, how stimulating
So, if the Democrats on the Senate Committee who drew up this proposal have their way, the first time home buyer tax credit would be extended to a lot more people — people who make more money, people who have already owned houses, people who want to buy a house after Nov. 30. Clearly the government is attempting to stimulate the housing market, which has been and still is in a slump.
Last month, home sales in the U.S. fell to the lowest levels seen since 1982. Of course, a $6,500 tax credit is not enough to get people who were not previously considering buying to go out and sign mortgage papers. However, for those who have been thinking about it, this not-just-for-first-time home buyers tax credit might be the push that they need.
Remember the mortgage crisis
Of course, anyone who is considering buying a home should not let this first time home buyer tax credit convince them to do something risky. Remember the whole sub-prime mortgage crisis? Yeah, that was the thing that pushed us into a huge, foreclosure-filled recession. So home buyers must make sure, tax credit or not, that they do not sign up for a mortgage they cannot afford.
Your monthly mortgage payments should be no more than one-third of your income, and even that is a little much if you ask me. There is no such thing as “a good time to buy” for everyone. Whether buying a house is a smart decision depends on your financial situation, and yours alone. The price of the home and its possible value in the future doesn’t matter as much as whether you can realistically afford your house payments.
Scammers at every turn
It remains to be seen whether this new version of the so-called first time home buyer tax credit will pass. Many critics have pointed out that a lot of people scammed the government out of $8,000 when they were ineligible for the tax credit.
Some people scammed the government by getting the credit even though they were not purchasing their first home. The new version of the tax credit would deem this a non-problem. Trouble is a lot of people pulled off getting the tax credit without purchasing homes. That scam is one that hurts fellow taxpayers because it does not stimulate home sales, and it does bilk the government out of much-needed funds.