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Homebuyer Credit & Jobless Benefits Extended (H.R.3548)

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Stimulus!In the last few months, there have been two big “stimulus” related items discussed in the House and Senate. The first was talk of extending the first time homebuyer credit in both time (when you could use it) and scope (who qualified). The second was about extending unemployment benefits by an additional 13 weeks.

Well, it turns out both are going to become a reality as the Senate passed H.R.3548 – Worker, Homeownership, and Business Assistance Act of 2009 two days ago. The House passed their version in late September and just yesterday agreed to the Senate amendment to the bill (this is the “marrying” up part). The bill is on its way to the White House, if it hasn’t been signed already.

Homeownership Credits

The last homeownership stimulus bill created an $8,000 tax credit for first time homebuyers. In addition to adding a $6,500 tax credit, the income limits have been raised to $125,000 for individuals and $225,000 for couples. The current limits are $75,000 and $150,000. Finally, if you sell the home or it is no longer your primary residence within three years of purchase then you must repay the credit.

The homebuyer tax credits:

  • $8,000 tax credit: If you are a first time homebuyer, you can get an $8,000 tax credit for purchasing a home. The claim deadline will be extended to April 30th, 2010, from the existing deadline of November 30th.
  • $6,500 tax credit: If you already own a home and have lived in it for at least five of the last eight years, you can get a $6,500 tax credit for purchasing a home.

Unemployment Benefits

Unemployment benefits will be extended an extra 14 weeks for individuals who have already exhausted their benefits or will exhaust them before the end of the year. If you live in a state where the unemployment rate is above 8.5%, then you will receive an additional 20 weeks of benefits. According to the Bureau of Labor and Statistics, the following states have unemployment rates above 8.5%:

  • MAINE – 8.5%
  • IDAHO – 8.8%
  • PENNSYLVANIA – 8.8%
  • NEW YORK – 8.9%
  • WEST VIRGINIA – 8.9%
  • ARIZONA – 9.1%
  • MISSISSIPPI – 9.2%
  • MASSACHUSETTS – 9.3%
  • WASHINGTON – 9.3%
  • MISSOURI – 9.5%
  • INDIANA – 9.6%
  • NEW JERSEY – 9.8%
  • GEORGIA – 10.1%
  • OHIO – 10.1%
  • ILLINOIS – 10.5%
  • TENNESSEE – 10.5%
  • ALABAMA – 10.7%
  • NORTH CAROLINA – 10.8%
  • KENTUCKY – 10.9%
  • FLORIDA – 11.0%
  • DISTRICT OF COLUMBIA – 11.4%
  • OREGON – 11.5%
  • SOUTH CAROLINA – 11.6%
  • CALIFORNIA – 12.2%
  • RHODE ISLAND – 13.0%
  • NEVADA – 13.3%
  • MICHIGAN – 15.3%

Business Assistance

If you’re wondering what the business assistance part of the Worker, Homeownership, and Business Assistance Act of 2009 is, even though it probably won’t affect you, you’ll be happy to learn that your local mom and pop store can deduct losses for 2008 and 2009 from profits in the five previous profitable years, increased from the last two years. Actually, any business can do this, not just “small” businesses.

How We’re Paying For This

For the fiscally conservative, you might be wondering how we’re going to pay for this. Extension of the homebuyer’s credit is going to cost around $11 billion and the business assistance will cost around $10.4 billion, according to the New York Times. Congress will pay for that portion of the bill by delaying a tax break for multinational corporations (it involves their worldwide interest expense), which will save around $20.1 billion. As for unemployment, otherwise known as jobless benefits, it will cost $2.4 billion and be paid by extending a $14/worker surcharge on employers into 2011 (which, by the way was created 30 years ago as a temporary measure… funny huh?).

(Photo: brapps)

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28 Responses to “Homebuyer Credit & Jobless Benefits Extended (H.R.3548)”

  1. Chris says:

    Doesn’t creating the tax buyer credit mean there will be less people to buy houses later? This may lead to an increase in sales which in turn may lead to more production which then puts us right back where we started with too much supply.

  2. @Chris – I don’t think you’ll need to worry about stimulating another round of overproduction. The credit markets remain very tight and homebuilders are focused on shoring up balance sheets before taking on new projects. There are still large tracts of land that remain un- or under-developed that were purchased by builders during the boom. They’ll work on finishing these developments first – albeit at a much slower pace.

    Also, if you look back at homebuilders, this has traditionally be a somewhat cyclical industry. We got into trouble because just like the tech bubble, people started to think there were no limits to growth. Oops.

  3. Nick says:

    So if I lived in my house for the previous 6 years, but have only owned the home for the previous 3, am I still able to get the $6,500 credit?

  4. JPeteQ says:

    It’s irritating for those of us who bought houses just before the crash and who are struggling but can still (barely) make ends meet and aren’t getting any help. I’m paying to help all these other people with my taxes.

  5. NateUVM says:

    Due to circumstances out of our control, we had to put off the purchase of our 1st home until next year. We were pretty bummed about losing out on the credit and were hopeful that something like this would occur.

  6. zapeta says:

    I hadn’t heard anything about this $6500 tax credit in the bill until it was passed yesterday. Its supposed to get people who already own homes to buy some of those giant McMansions that obviously aren’t selling. On the other hand, I’m glad unemployment is going to get extended for the people that need it.

  7. I’m really scratching my head at the group of people who are excluded by this benefit. My wife and I have lived in our house for 3.5+ years. Our second child is on the way, and we’d actually consider looking at a new (more expensive) house if we go an incentive. Without the incentive, we’ll likely stall for a few years.

    So what’s the logic in giving a credit to someone who has lived in their home for 5 years, while excluding those who have lived in their home for slightly less than that?

    I’m not sure how much of an actual cost there will be to the business assistance. It many cases, it just expidites the ability to write off the loss immediately rather than writing it off as a NOL carryforward in susequent years.

  8. eric says:

    Our state’s unemployment rate is off the chart…sigh.

  9. Those unemployment stats are really disheartening.

  10. Soccer9040 says:

    I was kind of hoping that I would be included in the home buyer program. We just bought a new house last month for our growing family, but we had a smaller starter home and saved down payments for both, played by the rules. So because we already owned a home we were excluded.

    This seems to exclude a certain group of the population.

    • mikestreb says:

      It does suck to be excluded from this. Almost like being punished for doing it the right way… That is government for you.

  11. NateUVM says:

    Simple answer here… They’re trying to incentivize consumption. For those of you that were already going to buy a home…this isn’t directed at you. It’s for those people that were thinking of buying but were scared at the prospect of giving up liquidity in these uncertain times in order to do so.

    In my previous comment, I mentioned how there were circumstances beyond our control that led to our passing on purchasing a home right now. If it were just about the credit, sure, we could’ve forced the issue and purchased a home. After all, we had a sizeable down-payment ready and everything. But we weren’t going to let a tax credit determine for us when the right time was.

    Folks, the tax credit is a nice thing for those it applies to. But allow major life decisions, like the purchase of a home, be driven by something so (relatively) minor (what’s $8k vs. the purchase price of a home?) and fleeting.

    • NateUVM says:

      That should read, “do not allow major life decisions, etc…”. Sorry for the need to edit.

    • saladdin says:

      I really don’t like how it’s referred to as a “$8k credit” either. I live in an area where you can get a 2000sq foot home with a pool right now for under 80,000. Which would mean less then 8K credit.

      saladdin

  12. Huh? says:

    I’m in Michigan and I just received a letter today stating that I am eligible for a 13 week extension under the EUC 2 provision. It says that if my benefit year ends while collecting the EUC, I need to file a new claim. as it is written, My end date for my current extension is 12/12/09, and my EUC Effective date is 11/01/09..It also says I will continue to collect either on my new claim or my EUC if I am eligible and qualified (the code on the back of the letter says I am)

    I wish this stuff was in plain English, IE: You get benefits until (blank) date.

    Is this second extension the emergency extension money, and I’m getting 13 weeks not the 20 listed above, or am I getting 13 from the state and then an additional 20 weeks from the Feds?

    • pcallaghan says:

      Call your unemployment office, they were able to spell things out much simpler for me than all the paperwork they sent me.

  13. pcallaghan says:

    Most people seem to believe that this tax credit is creating the same problem as before, people are buying more than they can afford. But this lends me to the question of what first time home buyer has a HUGE savings that can put the downpayment on their house and still have the full emergency fund. I just purchased a house with my girlfriend, we didn’t use the $8,000 towards our downpayment, we are using half to put money back into our emergency fund while half to update the house and make it more energy efficient.

  14. johnpmcglynn says:

    Keep stimulating, but be careful no to overspend.

  15. Stephen says:

    Excellent news! I’m currently closing on a large home out here in Hawaii. It’s a short sale so it is taking forever. The extension on the First Time Home Buyer tax credit is great for me but I do feel some sort of credit should be realized for previous homeowners as well.

  16. tbork84 says:

    I have a few friends that are in the market now for buying a home, and this is a great deal for them to be able to qualify for the credit (since I believe they are closing after the 30th). I do know for a fact that they would have gone ahead with the purchase regardless of the credit so it makes me wonder if it is really increasing demand that would not exist otherwise.

  17. mikestreb says:

    Anyone know how starting a small business affects unemployment? I assume this is a state specific question (Ohio). I know that they will reduce my unemployment benefits by the amount I earned. Does that mean I have to figure out my P&L weekly and report that? It isn’t going to be a small business, there will be rent, payroll, depreciation, etc. So it won’t be as easy as money in (less) money out (equals) what I made in a given week.

    I hope there is an easier way to do this.

    • You best bet is to check in with the Ohio Dept of Job and Family Services for the details. However, any net income you earn while self-employed will go against your unemployment benefits.

      Just remember that your earnings are really up to you to report to ODJFS. They have a difficult time tracking self-employment income as it really comes down to what you put on your weekly report. When you do your Schedule C, you’re also left largely to your own reporting though some of your transactions may come through 1099 income that the counterparty reports.

      Bottom line: check with ODJFS first, keep up with your P&L (a good habit anyway), and make sure you provide an accurate report to ODJFS.

      • mikestreb says:

        My issue with that is how do you do a weekly P&L with things that are more long term (depreciation, etc.) or that are unexpected. Am I able to spread out the expenses to show a more average result every week (example – if I have a large expense one week, then there would be a negative NI. The say the next week there are very few expenses and I end up showing positive NI. Am I able to smooth that out and show no income if the total of those two weeks is still negative? if that makes sense).

    • Jill says:

      Michael is right – this is definitely a case of having someone give a specific opinion tailored to you. Make sure you can afford the cut in benefits before you get started!

      • mikestreb says:

        The UE system is flawed. It has been great and has no doubt helped me greatly while I have been unemployed (laid off from a CPA firm).

        The problem I have with it is a mental block for me. I could go out and find a job right now (not as an accountant) for say $9 an hour (less than half of what I was making). Only problem is UE is essentially paying me $9.50 an hour. End result is, even though I work 40 hours a week, I bring home the SAME AMOUNT as I would if I sit on my thumb all day. If I find a job making $10 an hour, it is like I am making 50 cents an hour because UE was already paying me $9.50/hour.

        Either way, the benefits run out sooner or later so I need to do something. I can’t find a job in my educated field, so I am going to create one. Hopefully everything works out with it and I can work for myself instead of ‘The Man’ for forever.

        • @mikestreb – now that I know you have an accounting background, it’s game ON! Depending on your business structure, you can do a great many things to avoid showing any income whatsoever. As an example, if you are on a cash basis, simply defer your billings until after unemployment expires. If you’re on an accrual basis, accelerate major purchases or extend credit terms. You can be a sole proprietor (which is cash basis), an S-corp (delay dividends until year end or after unemployment runs out), or an LLC which has the option to be taxed the way you like.

          Having been an independent financial advisor for years, I know that I would do most of my billings at the end of the year or I would ask my clients to pay me in January of the following year to control my effective tax rate from year to year.

          Also, let’s say you buy a computer that must be depreciated over 5 years. You’re weekly P&L would reflect 1/260th of the purchase price as a depreciation expense (using straight line, MACRS could be better but haven’t looked at those rates in a good while).

          Bottom Line: You’re in the driver’s seat if you simply use what is already available.

          BTW-the UE system is SERIOUSLY jacked up. Good system, really frustrating administration, and a pain in the backside to deal with. Perhaps one of the UE strategies is to make it such a pain that you do ANYTHING to stop dealing with them.

          Stop by my personal blog at http://www.wealthuncomplicated.com and drop me an email. I’d love to chat with you and see if there’s anything I can do to help you get off the UE rolls.

          • mikestreb says:

            I knew I could get creative with it (within the law and IRC of course). Problem with deferring billings is this… The business is going to be a tax preparation business (similar to an H&R Block, but independent). Because of that, if I try to defer billing any later than before I efile a customers return, the chance I will see them again to get paid is slim. I have it setup in an LLC for this tax season. I may put it in an S Corp after tax season (depending on if I think it will save me on SE Tax). I think I can take a lot of bonus depreciation on new equipment (it was one of the stimulus act provisions to help out businesses – You can take 50% depreciation in the first year). I wonder if depreciation is an ‘excluded expense’ in the eyes of ODJFS or if there are any ‘excluded expenses’ like Meals & Entertainment?

            I also want to make sure what I do doesn’t screw up UE after tax season is over.

            I need UE to start backup when business stops in late April. I think I am in good shape as I never really found employment. They really need to put out a good guide for self employed people.

  18. Soldier Wife says:

    Q: for anyone who may know the answer.

    We qualified for the $8,000 first time home buyer stimulus. We have owned our home for 2 years. My husband is active duty and we just recieved orders to PCS to another duty station, but heard if we rent out our home we will have to pay back the money. I dont understand because we are HAVING to leave because of my husband being active duty. I heard there is a claus can anyone help?????


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