This week, the U.S. Congress passed the Unemployment Compensation Extension Act of 2009, which will extend the first-time homebuyer tax credit until April 30, 2010, and lengthen by 20 weeks unemployment benefits available to out-of-work Americans.

The bill passed the House easily and the White House has reportedly verified that Obama will sign it into law by week’s end, since his budget has reportedly already allocated funds for both parts of the bill.

Winning by Two-Thirds

The third major provision of the bill is one that would allow certain businesses (specifically home builders) to manipulate their books so that their net losses over the past two years can be extended for five years. This was apparently very popular among republicans, because of its attractiveness to many big businesses.

Two of the three provisions of the bill appeal to each major political party, prompting one analyst’s reported comment that everyone wins by two-thirds.

Provisions of the Bill

The extension of the homebuyer tax credit will include:

• Extension of $8,000 tax credit: The credit will be available until the end of April for first-time homebuyers, but mortgage agreements must be in escrow by the beginning of the month to qualify.
• Move up credit of $6,500: For homebuyers who move after having lived somewhere for at least five years, a reduced tax credit will be available. Both credits, though, would have to be repaid if the homeowner moved away within three years.
• Increase of income limit: Under the bill, a single-income homebuyer will be able to make up to $125,000 annually (up from $75,000) and two-income homebuyers could earn up to $225,000 (up from $150,000).

Reports indicate that, so far, 1.2 million Americans have already applied for the credit on their tax returns, which means that only $8.5 billion of the allocated $13.6 billion has so far been claimed.

Fraud in the System

Some sources suggest that, while it has proven successful for many Americans, the homebuyer tax credit has already seen its share of fraud. Some people who applied for the credit were allegedly too young to qualify – reports even indicate that one applicant was as young as four!

Additional Resources

Emergency Unemployment Compensation Extension Act of 2009 (PDF)