Debate Over Expanded Tax Credit for Buying Foreclosed Houses

The deadline for first-time buyers to use the $8,000 federal tax credit in buying foreclosed houses is fast approaching. Already, supporters are clamoring for the program to be extended, saying that it could help control home price declines.

But critics argued that the program is an expensive, temporary fix to the foreclosure problem. So far, everything works in favor of supporters of the federal tax credit. The U.S. Congress is reviewing proposals to expand the tax credit offered to first-time homebuyers to include everybody except wealthy homebuyers.

Supporters of the federal tax credit said that expanding the initiative would help boost home sales across the country, stabilize and strengthen housing prices and values and generate much needed jobs.

On the other hand, opponents of the tax credit program said that expanding it is just a waste of taxpayers’ money and will only provide a temporary solution to the problem of declining prices. The tax credit is available to prospective buyers who have not owned a property for at least three years. They should also complete the process of buying foreclosed houses on or before November 30 if they want to use the federal tax credit.

Aside from extending the deadline of the federal tax credit program, some lawmakers are contemplating making the initiative available to buyers who meet the income requirements. Others want to raise the tax credit amount to $15,000 from the current $8,000.

Under the current program, first-time homebuyers can avail of the full $8,000 credit if they purchase a property and make it their primary residence. They should also earn not more than $75,000 or $150,000 for couples. For prospective buyers who are earning not less than $75,000 and not more than $95,000, a partial tax credit is available. For joint filers, they should earn not less than $150,000 and not more than $170,000.

As of middle of September, nearly 1.4 million taxpayers qualified for the credit. It is expected that before the November deadline, the tax credit will have been taken advantage of by about 1.8 million buyers.

Some industry experts favor extending the tax credit program until the first of June 2010. They prefer the program to help homebuyers from all walks of life in buying foreclosed houses.

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