The deal struck among key senators last night to extend the homebuyer tax credit will broaden the benefit to include existing homeowners who are buying a new home as well as first-time homebuyers.
Tax credit for move-up buyers will be less than for first-time buyers, but still significant. They will qualify for a credit of up to $6,500 and must have owned their current homes at least five years. Under the current program and the new one for 2010, first-time buyers qualify for up to $8,000 and cannot have owned a home for the past three years.
Income limits would rise under the new proposal. Individuals would have to make less than $125,000 a year and couples $225,000 per year to qualify. Under the current program, limits are $75,000 for individuals and $150,000 for couples. Move-up buyers will be subject to the same income limits as first-time buyers.
Under the compromise worked out last night, the homebuyer tax credit would be extended seven months. Homebuyers will have to sign contracts by the end of April in order to qualify and they would have until the end of June to close. The current credit expires December 1. Cost is estimated at roughly $10 billion.
The credit will reach the floor as soon as Democrats and Republications reach agreement on several related issues, possibly today or tomorrow. Senate Majority Leader Harry Reid, who played a key role working out the terms of the new credit, tried to schedule a vote Monday but was thwarted by Republicans who want a vote on a proposal to require people receiving unemployment insurance to be processed through the E-Verify program to prove legal immigration status and would require all federal contractors to use E-Verify. E-Verify is an Internet-based system that employers use to check on the immigration status of new hires. Republicans also are demanding the chance to offer amendments to restrict federal aid to the activist group ACORN.
Another issue that may or may not reach the floor this week is legislation popular with larger home builders that would extend the ability of money-losing businesses to claim refunds on taxes paid during profitable times up to four years ago. When passed in February it was limited to smaller companies with annual revenues of $15 million or less.
Once the homebuyer credit reaches the Senate floor in the form of an amendment to legislation extending unemployment benefits, passage is expected to be easy. The credit is highly popular with senators and their constituents who have benefited from it. About 1.4 million first-time homebuyers have qualified for the credit through August.
Enactment also should be quick and easy, and the credit may reach the President’s desk as soon as next week. The unemployment benefits is sure to pass the Senate and has already passed the House of Representatives. Differences between the House and Senate versions will be worked out quickly in a conference committee and returned to each body for a single up or down vote. There will no opportunity to vote on specific amendments.