If you want to hit me, punch here. I’m numb and can’t feel it anyway.
As we talked about yesterday, the $8,000 first time home buyer tax credit is extended, and that even existing owners who buy will be able to get $6,500. The new requirements – signed purchase agreement by April 30, 2010 and house closed by June 30.
How do you feel about that?
The Cost
Before you answer, here are some interesting facts:
- Extending the home buyer tax credit will cost $11 billion.
- It will further lure home buyers to purchase, some of which shouldn’t be buying in the first place.
- Many cities in the country are STILL overpriced. When you give incentives to fuel housing prices at already inflated levels, you are actually lowering everyone’s standard of living by strapping them into a HUGE mortgage payment. What does everyone have against renting anyway?
Nothing is one sided of course. Here are some people who will benefit.
- Realtors – It’s a no brainer for them. It’s no wonder that the National Realtor Association were pushing heavily for congress to extend this credit.
- Tax Accountants – More questions and complexity simply means more ways for them to charge.
- Politicians – Extending the credit gets you VOTES. The U.S. House of Representatives passed the extensions by a landslide margin (votes: 403 vs 12).
Honorable mentions: Movers, furniture stores, and utility companies for charging you setup fees by clicking a few buttons on their screens etc.
What Do You Think?
These tax credits take money from the left pocket and puts it in the right. Sure, it sounds like there are no consequences, until you realize the time involved in the activity and the fact that you drop and lose some of it every time you tinker with your money.
I am not in favor of the home buyers extension, even though I may end up getting $8,000 because of it. How do you feel about it? Would you have voted yes if you had the choice?
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{ 11 comments… read them below or add one }
I think it’s pretty fantastic frankly. 70%+++ of Americans own homes, so 70%+++ of Americans are affected by this bill.
The gov’t is spending billions bailing out everybody, what’s another several billion here and there?
Free money for all FOREVER!
I personally don’t think the current home buyers tax credit goes far enough to waste our money. I think while we’re out it we need to throw a trillion or so at building an amusement park on the moon.
But even our skillful politicians would have a hard time spinning that one as the “American” Dream.
The Chinese might help though since it’s a better use of their money unless we fix the long term trend of the US dollar decline.
I think most people will take a tax break instead. The effort is honorable and all but I don’t think most people like to have their wealth redistributed involuntarily.
Another stupid bailout. They keep saying that we are out of a recession but they keep issuing more bailouts. I sincerely hope that we don’t see more in 2010.
Do you really think that the people buying homes right now are the ones who shouldn’t be buying? I think that we have weeded out all of the people with not enough real income, and the banks are very scared to lend. So, I think that those buying a home right now are people who have the income, can afford it, buying the right size home, etc.
I do think that the program shifts demand instead of creates it. We are just robbing demand from the future with this program. At some point, the program has to end and demand will fall off a cliff. Or, the worst thing can happen…the program never ends!
Shouldn’t is a very broad, but I will answer assuming that you mean “affordability”.
When is a house really affordable? Is 20% down and 30% income affordable? If so, what happens the minute you lose your job? Too many Americans stretch their purchasing power to the limit based on the relax (still) lending standards and then find themselves in real trouble as soon as a recession hits because they lost their job.
In the city where I live, there are currently bidding wars on houses that are $1 million dollars, even though the median household income in the same city is just $90,000.
You are right, we weed out the very low end but a person making $45,000 buying a $500,000 house is just as dangerous as a $90,000 income earner buying a $1,000,000 house.
Actually, the latter is even more risky to the system as a whole.
Housing is affordable when we can put 100% down and pay cash money, just like everybody did in the old days!
Great if it keeps real estate moving, which is what we need.
I’m agnostic about it even though I’ll probably get the $8k myself. People look at it as free money, without realizing that $8k is nothing compared to the overall amount of money being spent over the life of the loan.
It’s chump change, really.
But you know what? Getting $8k back months after closing on your first place….that would certainly help to cover all the moving expenses, furniture buying, etc. Replenishes that emergency fund nicely…
I, after running in circles with the IRS for almost a year, am NOT in favor of this credit (if you can even call it one). Due to the incredible amount of fraud surrounding this credit, those of us who are honest, tax-paying citizens will probably never see a dime! I bought my house in January, amended my 2008 return in February, and have been sending in “additional information” on the purchase every two months since. In fact, my most recent correspondence informed me that I needed to send in a copy of the final closing statement (that was the first thing I sent!).
So, I, having once been the trusting American citizen who saw a saving grace in this credit, am now somewhat bitter. I am just thankful that I have the money to have purchased this home anyway. Some, as you pointed out, do not.