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Will You Get a Shot at a New Home Tax Credit?

With the current $8000 first time home buyer tax credit expiring, many who weren't ready to buy a home before are wondering if they'll be able to take advantage of a new version.  Trying to predict what may come out of Congress is like winning the lottery, but there's enough talk in those halls to get some ideas of what could happen.

Support is There - Bipartisan support is in place in Congress for an extension, and even an expansion of eligibility.  President Obama has expressed his support for an extension for a "limited period."

Those in Favor Say - It helped to boost home sales in the last few months, and should be extended to continue that support.  Without it, home price declines will begin again in earnest.  If housing isn't prosperous, many other facets of the economy suffer.

Those Opposed Say - Like many government initiatives, the tax credit was poorly targeted, and was not cost effective.  Benefits didn't justify the costs.  They quote a survey that says only 10% to 20% of those who purchased a home with the credit did so only because of the credit.  The rest would have bought anyway, with the credit just a boom to their finances.  The liberal Center on Budget and Policy Priorities published a position paper recently that says making the tax credit available to existing homeowners will not stabilize housing prices or reduce inventory.

What's the Latest Compromise? - As with most contested bills, there are several compromises falling between the least and most generous proposals.

  1. One bipartisan compromise wants to extend the credit through spring and expand it to existing homeowners who want to upsize their homes.
  2. Another approach, or possibly an add to any bill that makes it would be $8000 for first-time buyers, and $6500 for those trading up.  But, they would have to have lived in their homes for five years to get the trade-up credit.
  3. Possibly a requirement for any bill that gets through would be a limitation on adjusted gross income of $125,000, and $225,000 for married couples filing jointly.

We'll all just sit back and wait to see what makes it out of Congress, as most of those who have the nerve to make predictions believe that some extension is likely.

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