First Time Homebuyers Credit is Nearly Extended

The U.S. Legislature is getting closer than ever to signing an extension to one of the few populist pieces of President Obama's Stimulus package - the First-Time Homebuyers Credit.

The 2008 version offered 10% of the purchase price up to $7,500, as tax-free loan - which has to be repaid over 15 years, starting next year. That was helpful...but many people were leery of using it, since it had to be repaid. And who's going to remember to include that on their tax 5 years from now? Room for lots of potential penalties - unless IRS sends out a reminder for each of the next 15 years.

The 2009 version offered 10% of the purchase price up to $8,000 - as an outright gift to new homebuyers. That has been scooped up by as many people as could qualify for a new home - any kind of new home. And it attracted over $600 million in fraudulent filings before IRS put a brake on issuing refunds without investigating. Now, IRS is holding refunds up for 3-6 months while they substantiate each request. Talk about a nightmare!

The 2010 version is expected to be the same as 2009 - 10% of the purchase price up to $8,000 for new homebuyers - for contracts in process by April 30, 2010 and finalized by June 30, 2010. But there's a twist for the rest of us. If you want to buy a new home and you've lived in your home for at least 5 years, you'll get up to $6,500. That's going to get a lot of people excited!

This IS great! IRS will still be holding up refunds ad infinitum unless some safeguards are put into the law. You can read more about the problem here. In fact, if you have any pull, or persistence, contact your legislators and put pressure on them, too.

Regardless, even if it takes 6 months to get, the recipients of these monies will be delighted. It will help them buy homes they might not have been able to afford - or perhaps to furnish their new homes!