Will the $8,000 Tax Credit be Renewed?

That is the question many people are asking these days. The $8000 tax credit incentive passed last February is head and shoulders above its $7500 predecessor last year which was really only an interest-only loan that had to be paid back. This new tax credit is FREE MONEY- you keep it provided you qualify and live in the property. This great incentive combined with historically low prices has turned our local real estate market around! Our prices finally stopped declining and sales have gone up. It’s made such a big difference that many people have become increasingly concerned that upon its expiration on November 30 (just 5 weeks away), we’ll be facing a slow-down in sales.

In order to ward this off, many have been petitioning the government to extend the tax credit. One thing to consider with the early requests was that having a deadline gave people urgency and that urgency has lead to more sales and a stop in price declines. Many of us have been hoping that we’d see the credit renewed upon expiration. There’s been much speculation about fostering that sense of urgency by waiting until the last minute to extend the credit. Unfortunately, it’s become more complicated than that.

The chief concern right now seems to be the government’s challenge of estimating how much this will cost. Since most of these credits will not be claimed until tax time next year, it’s going to be difficult to determine exactly how many people will file. HUD Secretary Donovan cautions that a decision should not be rendered without a thorough examination of cost. This is understandable and it may lead to the decision being tabled for a while.

The other big concern is fraud. There have been 167 cases of confirmed criminal fraud so far and the IRS has begun examining over 107,000 cases that they consider questionable. If they do decide to extend the credit, they’ll have to decide how to best organize the process to prevent fraudulent activity.

So for now, the answer is a big fat…"we’ll see…"