Keeping Homebuyers Tax Credit Strong

Congress is revving its engines ready to make further investments into the homebuyers’ credit scheme.

Started last year the scheme is expanding and would be now be extended to cover homes under contract by April 30. Not only that but the scheme is no longer limited to first time buyer mortgages; people who have owned a home for at least five years could get a $6,500 credit on a new residence. Income limits for eligibility would be raised, making many more people qualify.

However, the expansion of credit would cost an estimated $11 billion, on top of the $10 billion spent so far. There are critics which believe that most of the credits go to taxpayers who would have bought their homes anyway, which even the industry acknowledges.

The Government did assure the people that many of the present problems may be due to confusion among taxpayers and the Internal Revenue Service about the overlapping 2008 and 2009 versions of the tax credit. With Congress likely to change the eligibility provision again, the new measure could present further administrative problems for the I.R.S., although the measure does include several new safeguards.

“It’s not unreasonable to think that this is going to provide some further challenges for them, both in terms of implementing a third version of it and in terms of ensuring taxpayers’ compliance,” said James R. White, director of tax issues for the Government Accountability Office.

The expanded homebuyers’ tax credit was attached to a bill intended to extend unemployment compensation for up to 20 weeks for people who have been out of work for long periods. Another amendment would sweeten a tax break for business banks with net operating losses in 2008 and 2009.