The Government Accountability Office released a report on the First Time Homebuyer Credit indicating that it may result in total revenue losses to the federal government of about $22 Billion through 2019. There have been three different versions of the tax credit.
The Housing and Economic Recovery Act of 2008 (Housing Act) provided taxpayers with a refundable tax credit, meaning it is paid even if there is no tax liability or if the credit exceeds any tax due, equal to 10 percent of the purchase price of a home, up to a maximum of $7,500. Taxpayers must repay the credit over 15 years beginning in the 2011 filing season. This was basically an interest-free loan. From a taxpayer perspective the value of the subsidy is the reduced interest cost relative to what would have been paid with alternative financing. From the government's perspective, the cost of the subsidy is the interest cost at the Treasury bond interest rate along with losses from taxpayers that fail to comply with the repayment provision.
The American Recovery and Reinvestment Act of 2009 (Recovery Act) provided taxpayers with a refundable tax credit equal to 10 percent of the purchase price of a home, but increased the maximum credit to $8,000 with a waiver of the repayment provision for purchases in 2009. However, taxpayers are still required to repay the credit if the home is resold or ceased to be his primary residence within 3 years. The repayment provision is limited to the amount of gain on the sale, so a taxpayer could sell within 3 years and still not owe any repayment.
The Worker, Homeownership, and Business Assistance Act of 2009 (Assistance Act) extended the time frame in which homebuyers could claim the Recovery Act version of the tax credit from November 30, 2009, to April 30, 2010, and included several modifications, such as allowing certain long-term homeowners to purchasing new homes to claim a tax credit up to $6,500.
According to the IRS, through July 2, 2010, about 1 million claimants claimed $7.3 billion in interest-free loans through the Housing Act provisions. About 2.3 million claimants claimed a total of $16.2 billion using both the Recovery Act and Assistance Act provisions.
Not surprisingly, California, the most populous state in the country, ranked 1st with the most credit dollars claimed. However, California ranked 32nd and 29th in the amount of credit claimed per resident under the Housing Act provision and under the combined provisions of the Recovery Act and Assistance Acts, respectively.
Nevada ranked 1st in the amount of credit claimed per resident under all of the Acts. However Nevada ranked 26th and 24th in the amount of credit dollars claimed under the Housing Act provision and under the Housing Act provision and under the combined provisions of the Recovery Act and Assistance Acts, respectively.
Utah ranked 1st in the average dollar amount of credit claimed per claim under all of the Acts. However, Utah ranked 29th and 30th in the amount of credit dollars claimed under the Housing Act provision and under the combined provisions of the Recovery Act and Assistance Acts, respectively.