$15,000 homebuyer credit cut in compromise, Stimulus package may restore higher loan limits

By
Mortgage and Lending with John Tuggle, Senior Mortgage Loan Originator, Envoy Mortgage, Ltd. NMLS# 211187
A proposal to provide a $15,000 tax credit to homebuyers was stripped from a $789 billion economic stimulus package that appears headed for a vote Friday, but a restoration of higher loan limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs appears to have made the cut. The $15,000 homebuyer tax credit -- included in an $838 billion economic stimulus bill passed by the Senate Tuesday (see story) -- was scaled back to $8,000 and limited to first-time homebuyers as part of a compromise between Democrats and Republicans. The Congressional Budget Office estimated the larger tax credit would have cost $35.5 billion, a price tag that proved too tough to swallow in conference committee negotiations where differences between House and Senate versions of H.R. 1, The American Recovery and Reinvestment Act of 2009 were ironed out. Instead, the compromise bill falls back on language approved by the House Jan. 28 (see story), which would have eliminated the repayment requirement on an existing $7,500 tax credit that is currently available only to first-time homebuyers through July 1. According to a summary of the compromise bill released by lawmakers Thursday, the tax credit will still be available only to first-time homebuyers -- those who haven't owned a principal residence in the last three years. But they won't have to pay it back, as is currently the case, and the credit will be increased to $8,000 and be available through the end of November. The smaller tax break will cost taxpayers closer to $6.6 billion over 10 years, a savings of nearly $30 billion.
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Rainmaker
278,445
Franklin & Brentwood, TN Homes Mike Nastri
Keller Williams Realty - Franklin, TN
It matters to us as much as it matters to you.

Still so much confusion about what this "Tax Credit" means and how it is applied.  Does a buyers tax liability/bill have to be $8000 or greater to get full benefit or will it be treated like the earned income credit where they can expect cash from the government if they owe less than the credit?

Feb 12, 2009 11:15 AM #1
Rainmaker
1,402,703
Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

Thanks for the update. It's very timely. I just shared this news with one of my current buyers.

Feb 12, 2009 11:28 AM #2
Anonymous
John Tuggle

Mike and others, The comprimise document states the following:

Refundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. This proposal is estimated to cost $6.638 billion over 10 years

I hope this helps and remember I am an old Realtor:  I work when Realtors work; nights and weekends!

You can always call on me for anything,

John Tuggle

Feb 12, 2009 11:39 AM #3
Anonymous
John Tuggle

Comprimise explanation from Congresional Summary

Refundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. This proposal is estimated to cost $6.638 billion over 10 years

Thanks for reading my stuff and please feel free to call on me anytime.  I was a Realtor before I was a Lender.

John Tuggle

Feb 12, 2009 11:41 AM #4
Rainmaker
278,445
Franklin & Brentwood, TN Homes Mike Nastri
Keller Williams Realty - Franklin, TN
It matters to us as much as it matters to you.

Thanks John,

So, if I understand correctly, if a buyer qualifies in every way for the maximum, they will get a check form the government for $8000.

Feb 12, 2009 12:09 PM #5
Anonymous
John Tuggle

Mike,

That is how I see it, however, I am not a tax advisor.  I always advise my clients to seek competant tax and legal advice.

Thanks and keep up the Real Estate Recovery Work!

John Tuggle

 

 

Feb 12, 2009 12:19 PM #6
Rainmaker
278,445
Franklin & Brentwood, TN Homes Mike Nastri
Keller Williams Realty - Franklin, TN
It matters to us as much as it matters to you.

Good point, but my son's tax advisor told him to ask your dad, he's a Realtor.

Feb 12, 2009 12:21 PM #7
Anonymous
John Tuggle

Mike,

Your son is doing the right thing.  I will say if your son purchased in 2008 he appears to be subject to the current $7,500 tax credit and it's rules.  If he is planning on purchasing anytime between January 1, 2009 and December 1, 209 he will be subject to these new rules.  It is very important to note that your son's tax advisor nor the IRS ahve the actual written rules included in the code yet.  It could take several weeks for all that to be revised.  If he can hold off to file he should until it is al settled.  Also, remember, Congress still has to pass this and the President still has to sign it.  If all goes smooth then it should be done by early next week and all codes updated within a month of that.

All of this is my best estimate.  Thanks,

John Tuggle

 

 

Feb 12, 2009 12:27 PM #8
Rainmaker
278,445
Franklin & Brentwood, TN Homes Mike Nastri
Keller Williams Realty - Franklin, TN
It matters to us as much as it matters to you.

Thanks again John, good post and great energy around it.

Feb 12, 2009 12:31 PM #9
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