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Senate votes 98-0 to extend homebuyer credit

November 05, 2009

So the $8,000 first-time homebuyer credit is riddled with fraud and costs taxpayers $43,000 to $80,000 for each home bought sooner as a result of the credit. The sensible legislative response would be to immediately repeal the credit, apologize abjectly, and have at least one Senator commit ritual Chuck Grassley atonement.

Of course, that's not what is happening. Instead the Senate yesterday voted 98-0 to extend the credit and make it apply to more people. WebCPA reports:

The refundable credit, which was included in the financial stimulus package in February, was set to expire at the end of November. But the real estate, mortgage and construction industries had pushed for an extension of the credit beyond the deadline. The new legislation extends the maximum $8,000 tax credit for first-time homeowners to April 30, 2010. It also includes a maximum $6,500 tax credit for existing homeowners who want to purchase a new abode. However, they need to have lived in their current home for five consecutive years within the past eight years.

The level of qualifying income has also been expanded, allowing individual taxpayers who make up to $125,000 and joint filers earning up to $225,000 to qualify. The earlier credit had been limited to individuals earning up to $75,000 and couples earning up to $150,000.

The credit phases out over a $20,000 income range, which creates a hidden tax bracket for single filers of 68% - the 28% regular tax plus the 40% additional tax caused by each dollar of income in the phase-out range.

Tax Analysts reports that the House may pass the bill, H.R. 3548, as early as today, and that the President is expected to sign (UPDATE, 11/6/09: The President signed the bill today).

Kay Bell has more.