The Real Estate Agent Blog

By Amy Hoak, MarketWatch

First-time home buyers who purchase a home this year can now take advantage of the stimulus bill’s $8,000 tax credit, the U.S. Department of the Treasury said in a news release on Wednesday.

Unlike the previous $7,500 credit available to this group of buyers, the credit outlined in the American Recovery and Reinvestment Act of 2009 does not have to be paid back — if the home remains the buyer’s “main home” for at least 36 months after the purchase date, according to the Internal Revenue Service’s Web site. First-time buyers, for the purpose of this credit, are those who have not owned a home in three years.

Buyers have to purchase a home before Dec. 1 to be eligible, and the credit can be claimed on a home buyer’s 2008 or 2009 tax return. Tax returns for 2008 are due by April 15, but most taxpayers can get automatic extensions to Oct. 15 without citing a reason. (You must pay any estimated tax liability at the time the extension is filed.) Filing an amended 2008 return after you buy would also be an option for getting the credit sooner.

“For first-time home buyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit,” said IRS Commissioner Doug Shulman, in a news release. “This important change gives qualifying home buyers cash they do not have to pay back.”

Buyers can claim 10% of the purchase price, up to $8,000, or $4,000 for married individuals filing separately, according to the IRS’ Web site. The credit starts to phase out for those whose adjusted gross income exceeds $75,000, or $150,000 for joint filers.
The IRS has posted a revised version of the form required to claim the credit, Form 5405, on IRS.gov. Visit IRS.gov’s first-time home buyer page.

“The expansion of the first-time home buyer tax break as part of the president’s recovery agenda gives money to taxpayers when they need it most, while also targeting an important group of buyers,” said Treasury Secretary Tim Geithner. “We view our economic recovery plan, our financial stability plan and now this homeowner affordability plan as three legs of the same stool — an integrated whole that represents our immediate response to the current crisis.

Last year, almost one out of two home buyers bought for the first time, according to the Treasury Department’s news release. The addition of new homeowners helps reduce inventory by filling vacant homes and allowing the sellers of existing homes to move on to another home.
Real-estate industry groups are hopeful that the new credit will have an effect on the housing market. Lawrence Yun, chief economist for the National Association of Realtors, said on Wednesday that the tax credit and other measures to stabilize mortgage rates and housing markets would probably boost home sales by about 900,000 this year. See Economic Report.

The U.S. Department of Housing and Urban Development also announced on Wednesday that it will temporarily increase loan limits for Federal Housing Administration-backed mortgages, also in accordance with provisions in the stimulus. The new FHA limits now go up to $729,750 in high-cost areas. The new limit on FHA’s reverse mortgage product also has been raised to $625,500.

The higher limits are in effect until the end of the year.

The government is throwing money out left and right. The money they are giving is supposed to be stabilizing the economy. Well, maybe it is helping, but what else could the money be used for that might stabilize the economy even more? Yeah, I am asking you. Any ideas, please comment on this post.

I’m saying, this is BIG money the government is dealing with here! All the bailouts combined will potentially cost $7.5 trillion ($7,500,000,000,000 – written out). To put that astronomical amount of money into perspective… Lets say you make $10 per minute, and you saved every dollar until you had saved $7.5 trillion. It would take you almost 1.5 million years to save that amount!

In addition to the $800 billion pledged to make credit more available, there is an additional $306 billion to bailout Citigroup. October 2008, congress allocated $700 billion to bailout some of Wall Street’s firms by buying up their troubled assets. $29 billion to JPMorgan, $122.8 billion to AIG and the list keeps going. The federal government has planned to buy up to $2.4 trillion in short-term notes. The FDIC feels $1.4 trillion would help guarantee bank-to-bank loans.

Leave a comment on what you think the government should be doing, where they should be giving money, and about this whole financial issue in general…