Thursday, Oct. 8
Posted: 2 p.m.
The first-time homebuyer credit is scheduled to expire Nov. 30. If you aren't already well along in the purchase process, you might miss out on this $8,000 tax credit.
Or maybe not.
Under pressure from the housing industry, realty professionals and voters (or at least people who promise, or threaten, to vote), members of Congress are likely to extend this tax break.
At the very least, expect Capitol Hill to clarify that first-time purchasers don't have to close on the house by Nov. 30, just be on the way to doing so. In fact, some reports say that some lawmakers want that the signing of a contract to be enough to qualify.
There's still much discussion about whether the credit qualification deadline will be extended. A lot of bills have been introduced to do just that, as well as expand it to beyond first-time buyers and increase the credit amount.
Prospects for those changes are a little murkier. It's not that Congress has suddenly abandoned its support of the American homeownership dream. The big problem for Washington, D.C., as for the rest of us elsewhere, is money.
Extending the credit at $8,000 or increasing it as some have proposed to $15,000 or opening it up for millions more buyers will mean less tax money for the Treasury. And right now, anything that adds to the deficit, regardless of how appealing from some political perspectives, is a nonstarter for many representatives and senators.
Plus, they are already grappling with the deficit and how to pay for health care reform.
One other homeowner political consideration, however, is much more likely to get attention. There's congressional consensus that eligible members of the military should get until the end of 2010 to buy a first home and take the credit if they have been unable to do so because of extended overseas duty.
Armed forces homeowners also will likely be excused from repaying the credit if a posting change requires them to move before meeting the three-year ownership rule.
I wish my psychic powers were a bit sharper, but right now the best I can do is tell all you nonmilitary potential first-time buyers that if you're already in the process of buying your qualifying home, stay the course. You'll probably be collecting an $8,000 credit when you file your tax return next year.
Don't forget the other costs: In the excitement of first-time homeownership, many folks don't think about all the ancillary costs. I'm talking about things like repair and maintenance and, of course, property taxes.
Sure you see them on the closing statement. In most cases, the money to pay this annual tax is part of your monthly mortgage payment. And you do get to deduct it at tax filing time.
But even a deduction can't erase the anger at what seems, even in this time of lower home values, continually rising real estate taxes.
Researchers with the Wisconsin Department of Revenue and the La Follette School of public Affairs at the University of Wisconsin-Madison, recently examined the dilemma faced by taxing jurisdictions when it comes to property taxes.
"In response to political opposition to the tax, during the last several years over half of the states have enacted or are considering provisions to place strict limits on the growth of property tax revenue or limit the growth rate of homeowners' assessed property values," say the team that published the paper The Growth of Homeowner Property Taxes: Evidence from Wisconsin.
Their findings are not promising, for homeowners or governments.
"Policymakers have found that the money spent in providing tax relief has largely failed to reduce citizen frustration over growing property taxes and property tax burdens," notes the report. "In today's climate of economic uncertainty, weak real estate markets, and budget deficits, state and local governments will likely face further complaints about the property tax at the same time that they have fewer resources available to address the issue."
As for the lower value, higher tax conundrum, the study noted that although Wisconsin has state-imposed limits on annual increases in tax levies, local governments remain free to raise tax rates. "Thus, in Wisconsin there is no reason that falling home prices will automatically translate into reductions in property tax liabilities for individual taxpayers," say the researchers.
I must report that's the frustrating case here in Texas, too.
True, the Wisconsin researchers' work is not revelatory, but as one of those homeowners who's been paying higher property taxes while watching home prices (and presumably the tax collector's assessed values) fall, it's nice to know that my tax misery has company.