The American Recovery and Reinvestment Act passed in February 2009 included a provision granting an $8,000 tax credit to first time homebuyers. The tax credit program ends on November 30, 2009 and there is a push on to extend it into 2010.
The Homebuyer Tax Credit Act of 2009 has been introduced in the House of Representatives. This is the bill that proposes extending the tax credit. One of the co-sponsors of the bill is Congressman Denny Rehberg of Montana.
Congressman Rehberg was quoted as saying, “While there are a great number of things we can do to spur economic recovery, few can match the impact of a strong housing market. The benefits of the homebuyer tax credit can be seen throughout Montana and the country. If we want true economic recovery, let’s extend what works and eliminate what doesn’t.”
In the last few month, one out of three first time homebuyers took advantage of the credit. The Homebuyer Tax Credit Act of 2009 and similar other proposals would extend the credit and also expand who is eligible for the credit. In fact the new law makes the tax credit available to all home buyers while also raising the credit to 10 percent. The benefits have extended to new homebuilders also who were able to build and sell houses that would not have sold otherwise in a struggling economy.
Now there is a developing problem with the current program. It seems that some of the tax credits taken so far were not legitimate. The IRS is reviewing 100,000 tax credit claims that appear to be fraudulent on the surface. The Wall Street Journal reported there are up to 167 criminal schemes being investigated. The Treasury Inspector General for Tax Administration has reported that there are almost $489 million in tax credits claimed by people who did not qualify.
The discovery of possibly fraudulent tax credit claims now creates a problem for those policy makers trying to extend the program. If fraud is rampant there is little chance the credit program will be continued. Yet many locales are counting on the continuation of the program to stimulate local economies. And consumers have embraced the program as evidenced by the number of credits claimed.
Here is an important point for consumers to be aware of though. It seems there were a number of tax credits taken by people who did not mean to violate the rules. They inadvertently filed for the credit believing they were eligible. Over 1 million taxpayers bought new homes and claimed the tax credit, but there has not been a report issued yet on how many were actually fraudulent and how many were mistakenly requested.
If you are considering purchasing a new home and are a first time homebuyer, it’s important that you make sure you are truly eligible. Your real estate agent, financial counselor and mortgage company should know and understand the law. But it’s just as important that consumers understand the legitimacy of their eligibility.
As always, personal debt is the responsibility of the consumer.
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