Don't Mess With Taxes

Since the bursting housing bubble was the event that sent the U.S. economy into the tank, it's no surprise that we all continue to be fixated on real estate.

You or someone you know is looking to sell, buy or, in my case, wondering about the new neighbors who soon will be moving into the neighborhood. I presume they'll be here shortly. There are two huge crates from DoorToDoor.com sitting in the driveway. 

Housing also is getting renewed attention in the tax world.

The IRS is reminding first-time home buyers that time is running out for them to take advantage of the new and improved $8,000 credit. As the IRS warns (and as I did in my post First-time homebuyer credit clock ticking), you must close on your qualifying first-home purchase by midnight Nov. 30.

The housing market seems to be picking up in some areas, and that means all the official paperwork could be slowed. So if you're thinking of claiming the eight grand tax break, make sure your real estate ducks are in a row and marching toward closing in time.

The real estate industry is loving the credit, saying that it has helped move properties. And such praise from a politically active and PAC generous sector has sparked lawmaker interest in extending,  increasing and/or expanding home buying tax breaks.

House help for military home buyers: H.R. 3590, the Service Members Home Ownership Tax Act of 2009, was Introduced yesterday, Sept. 17, by House Ways and Means Committee Chair Charles B. Rangel, D-N.Y. This bill would increase flexibility of the first-time home buyer credit for military service members otherwise unable to claim the credit due to extended duty outside the United States.

It is cosponsored by 28 other Democrats and Republicans and is expected to bypass the Committee and go directly to the House floor within the next two weeks.

The Rangel bill incorporates provisions of other, previously introduced military housing bills.

Part comes from H.R. 2562, Service Members Home Ownership Act of 2009, introduced by Rep. Ron Kind, D-Wis., who says his measure "a simple correction" that would extend the credit through Nov. 30, 2010, for those armed forces members deployed overseas during 2009.

Another provision come from the Service Members First-Time Homebuyer Relief Act of 2009 (H.R. 2398), a measure proposed by Rep. Walter B. Jones, R-N.C. This would exempt service members from the first-time home buyer tax credit's repayment requirement if they are forced to sell their homes within 36 months of purchase because of official deployment or other orders.

Senators offer housing legislation, too: On the Senate side of Capitol Hill, Sen. Johnny Isakson, R-Ga.was first out of the home tax break gate with his Jan. 15 introduction of S. 253, the the Fix Housing First Homebuyer Tax Credit Act. He wants to extend the credit for one year, as well as increase the maximum credit to $15,000 and make it available to all, not just first-time, home buyers.

Isakson says his bill reflects his personal pre-Congress experience. He spent more than three decades in the real estate business. And it's no surprise that Isakson's proposal has been endorsed by the National Association of Home Builders and the National Association of Realtors.

A less expansive extension effort also is getting Senate attention. Sen. Benjamin L. Cardin, D-Md., has introduced S. 1678, which would extend for six months the first-time home buyer credit. That would give eligible buyers until May 31, 2010, to close on a qualifying first-time home purchase.

Cosponsors of the Cardin bill include , Senate Majority Leader Harry Reid, D-Nev., and Senate Finance Committee members John Ensign, R-Nev., and Debbie Stabenow, D-Mich.

As the Nov. 30 deadline for the first-time homebuyer credit nears, look for things to heat up on the Hill.

Cool it on the housing credits: Personally, I wish they'd just leave things alone for the most part.

I do agree with changes that could help military personnel who have to sell before they meet the credit requirements. It's a small way to help out the folks who volunteer to serve in our armed forces.

But you, me and our neighbors need to just deal with the system. The original credit, along with the one tweaked under the February stimulus, apparently have done their jobs. Fine. Now let the marketplace work. That means some folks will be able to afford houses and some won't. Some houses will sell quickly, others won't.

And in some cases, renting is a better option, even if you do have money to buy a house. Welcome to the real world. As I said, deal with it.

Then there is the overall economy issue. Isn't 'helping" folks who couldn't afford to buy what got us into this economic mess in the first place?

OK, expanding the home buyer credit might not be as egregious as the sub prime lender schemes that knowingly put folks ill-equipped to make continuing house payments into homes. And yes, there are offsets in the bills to pay for the tax money that will be lost by allowing the credits.

But is this really where we need to be putting out tax money? Aren't we trying to figure out how to pay for insurance for millions of folks? How about using some of this money there?

Plus, let's be honest, many of these extensions are flat out pandering to political special interests that would be oh so thankful financially this coming midterm election year.

I'm not saying folks need to abandon their quest of the American homeownership dream. For many, it is a fine thing. And we still offer plenty of tax breaks once they're there.

But trying  to get as many people there as quickly as possible shouldn't be Uncle Sam's job. Prospective homeowners can still get their slice of the real estate dream pie the old-fashioned way, by saving for the down payment, buying a realistic home and getting a legitimate mortgage.

That will give them security, some ownership tax breaks and money left over to help keep our economy chugging along.

Related posts:

• First-time homebuyer credit clock ticking
• When renting is the right choice
• Homebuyer tax credit rumors, realities
• Housing credit becomes down payment