photo credit to Infrogmation
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President Barak Obama is poised to sign a measure today that will extend and expand the first time home buyer tax credit, extent federal unemployment relief, and expand upon available business loss deductions.
The U.S. Senate anonymously approved the measure on Wednesday and the U.S. House of Representatives followed suit on Thursday to pass the extensions by a vote of 403-12.
Is it Retroactive?
**UPDATE** For clarification on exactly who is eligible, read: Is The $6,500 Homebuyer Tax Credit Retroactive for Existing Non-First Time Home Buyers?
First thing’s first… is this bill retroactive? A lot of people want to know!
As far as I can tell from the research I have done, the bill is NOT retroactive. The wording in the amended H.R.3548 goes like this, “shall apply to residences purchased after the date of the enactment of this Act.”
Bummer for a lot of preexisting home buyers who could have used it… including me.
What Credits Did the Measure Extend?
- The original $8,000 credit given to first time home buyers will be extended for an additional 6 months with a new claim deadline of April 30th, 2010. The credit benefit deadline was previously set to expire on November 30 of this year. To claim the credit, use Form 5405 which you file with your original or amended tax return.
- Unemployment benefits were extended an additional 14 weeks for those who have exhausted their federal aid or will do so by the end of the year. In states where the unemployment rate is at or above 8.5% the benefits were extended an additional 20 weeks. The federal aid kicks in after the initial 26 weeks of state benefits are exhausted.
Who Was the Credit Expanded to Include?
- A $6,500 credit will be extended to include home buyers who have lived in their current home for at least five of the last eight years.
- The measure also raises income limits for those claiming the credit to include individuals earning up to $125,000 a year and couples earning $225,000 a year. The previous limits were $75,000 and $150,000 respectively.
- Please note that… any home owner who sells the home or ceases to use it as a primary residence within three years of purchase must repay the credit.
- Any struggling business can now deduct losses for 2008 and 2009 from profits in five previous profitable years. It was originally two previous profitable years and was extended only to small businesses.
To Be Eligible for the home buyer credits… buyers in both groups have to have signed a purchase agreement by April 30, 2010, close on the home by June 30, and must use the home as a principal residence.
Should the Government Have Extended Benefits?
This will be the 4th extension of the original $787 billion stimulus law (enacted in quarter four of last year) passed by the federal government in the past 18 months and will stretch the federal aid from 79 weeks to a record 99 possible weeks! This amount of government intervention in unemployment aid is unprecedented in all past economic downturns, showing once again the severity of the current recession.
Although most taxpayers will take advantage of the extended credits, many are wondering where the government is getting the money from.
According to The New York Times,
Expanding the home buyers’ credit will cost about $11 billion, and the business loss deductions $10.4 billion. To pay for that, Congress further delayed a 2004 tax break for multinational corporations’ worldwide interest expenses that has never taken effect, “saving” $20.1 billion over the coming decade.
The $2.4 billion cost of the jobless benefits will be paid by extending into 2011 a surcharge on employers of $14 a worker that was enacted three decades ago as a temporary step.
What Do You Think?
Are you happy the tax credits have been extended? Are you worried about where the money is coming from? Are you both happy and worried?
Chime in now.
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DFA is passionately dedicated to helping people break the bondage of debt and work toward financial freedom using biblical principles.
Recently I had a bit of a “tweet off” with Suze Orman because of a slight breakdown in communication between Suze, my wife, and myself…
