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The homebuyer credit extension holdup

By Kay Bell · Bankrate.com
Thursday, June 24, 2010
Posted: 2 pm ET

You've probably heard that the first-time homebuyer tax credit might be extended.  More precisely, as my Bankrate colleague Holden Lewis blogged, it's the closing date that might be pushed to Sept. 30.

Not that I want to get into good blogger, bad blogger with Holden, mainly because I deal with taxes, which automatically tends to push me into the "bad" side of things.  But since this is part of a major piece of pending tax legislation, I do feel a responsibility to bring you up to date on the proposal.

The news is not good. See, I told you; I'm the bad-news blogger.

The possible change (yet again!) to the first-time homebuyer credit was a provision added to the Senate version of what's known as the tax extenders bill. It's official name is H.R. 4312, with the catchy title of the American Jobs and Closing Tax Loopholes Act of 2010.

This bill contains around 70 tax breaks for individuals and businesses that expired at the end of 2009. Among them are the itemized deduction for state and local sales taxes, the additional standard deduction for state and local real property taxes and the above-the-line deductions for qualified tuition and related expenses and educators' out-of-pocket expenditures.

For older IRA holders, the bill also would reinstate your option to roll distributions from your retirement account tax free to qualified charities.

These tax breaks are called extenders because they officially are temporary, but usually are renewed (extended) each year. Capitol Hill has been trying to renew this latest batch since December 2009.

The big problem is how to pay for it. That's an honest consideration. Congress should be mindful of of what its actions will cost us or future  taxpayers.

But the costs of these tax breaks to the federal treasury also have become a game of political football, more this year than usual, as deficit hawks have been making primary election gains. Folks in Washington who want to keep their jobs are worried about how the extenders' price tag might play out when folks go to the polls in November.

So the tweaking of the extenders bill has continued. The House passed a version in May, but the Senate is having difficulty approving a bill, thanks in large part to the procedural ability of opponents to stop consideration of measure unless 60 or more Senators vote to do so.

Senate tax writers last night came up with a third version of the extenders and yes, it includes more time to qualify for the first-time homebuyer credit. They hope the changes will get them to the magic 60-vote number.

But don't hold your breath.

And if you signed a home purchase contract by April 30, you'd best try to close in the next few days just to make sure you can claim that tax credit on your 2010 tax return.

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8 Comments
Tonya
June 28, 2010 at 8:18 pm

I've been in contract since March 22nd and three weeks ago, I was asked to put up more $9000 more or they will offer the house to someone with a higher bid. I told them no and they lowered it to $3000 more. I told them no again and finally they gave me the sale two weeks ago. Everything is signed and paid in escrow by this morning but the final papers from the bank hasn't been forwarded to escrow. Two days left or I lose the $6500 credit, that's $13,000 of taxable income.

Jennifer
June 26, 2010 at 2:24 pm

I can't agree more with you guys this has been the most nerve recking. I had put a contract on April 28th and now it almost June 30th and still waiting for the 2nd mortgage on the shortsale to approve...so I can propbably kiss the 8 grand good-bye, I guess? Unfair! I am so p-off because I did my end now it's the waiting game...UGH!

Jason
June 25, 2010 at 3:25 pm

HUD is a joke, our loan documents have been at escrow (GBS a gov't contractor who is the only escrow office HUD will use in WA) since Monday. GBS says they won't even look at the file until July. Since we went under contract interest rates have fallen. Without the $8000.00 incentive there is no reason to close. Home values will continue to fall, especially without the tax credit. I think we'll opt to back out and try and get a better deal... I'm sure we'll end up saving over $8,000 by finding a better deal, and likely won't be waisting our time with HUD again.

Rick
June 25, 2010 at 12:15 pm

I also am under contract since Feb 16th 2010 and because of the short sale the investors on the other end our taking their sweet time. Long story short they are costing me 8 grand. I explained to them they have five days and if the extension is not granted I will be backing out of the deal it is in the contract that the 8 grand be granted in the tax credit of the contract will allow me to back out.

Kay Bell
June 25, 2010 at 7:05 am

Sorry, Alan. I wasn't being flip and I realize that sometimes the homebuying process is out of our control. The one ray of hope I can offer is that the Senate (and then a conference committee) probably will approve the tax extenders sometime this year. And they could include the closing date extension in that or deal with it seaprately. If that happens after June 30, they'll likely make the extension retroactive.

Alan
June 25, 2010 at 12:37 am

"And if you signed a home purchase contract by April 30, you'd best try to close in the next few days just to make sure you can claim that tax credit on your 2010 tax return."

Easier said then done. I have been waiting a full week for the IRS to certify my tax returns so that the loan can move forward. The lender notified us today that we are simply out of time and that unless the extension passes we are out of luck. Makes me wonder if this was the plan all along. It is not mandatory for us to get this tax break for us to continue with the home purchase, but I can't help but see a domino effect of buyers backing out of deals.

Tony
June 24, 2010 at 5:27 pm

It only makes perfect sense to grant the extension to current qualified home buyers...which means Congress won't pass the extension. These are people who met the April 30 deadline to have a sales contract in place, but whose closing process is taking longer than expected due to the # of applications & overloaded attorneys.