New tax credit available for homebuyers

The stimulus package provides $500 to new homebuyers in Missouri.

By Andrew Denney

Published April 27, 2009

Missouri is offering a unique addition to a federal tax credit program intended to bring the country's housing market out of the doldrums by offering credits to first-time homebuyers.

The program, which is part of the $787 billion federal stimulus package passed in February, increases the amount that first-time homebuyers can receive from the program from $7,500 to $8,000. The original amount was set in stimulus package passed in November 2008.

The Missouri Housing and Development Commission is offering a variation of the program that no other U.S. state is practicing. The commission is offering to preemptively loan homebuyers the money for the federal tax credit before the federal government distributes the credit. The homebuyer then turns federal credit over to the state commission, and must keep the same address for three years. The homebuyer must also pay back the loan before June 2010 to avoid interest charges.

Without this variation, homebuyers in Missouri would first have to purchase a home, and then would receive their tax credit after they filed their income taxes for the following tax season.

U.S. Sen. Claire McCaskill, D-Mo., was in Columbia on Saturday for a news conference to discuss the program. The conference was held at the home of Travis and Jessica Peterson, two longtime Columbia residents who just purchased a home on the east side of the city and soon thereafter received $8,000 from the program.

In a news release issued prior to her appearance, McCaskill said the tax credit program would help to recover the economy.

"Buying a first home is an integral part of the American dream and the economic recovery package gives first-time homebuyers a tremendous incentive and help in realizing that dream," McCaskill said in the release.

The Petersons, who had already purchased the house but received the credit, said they were going to use the money to build a privacy fence around the backyard of the house.

Jessica Peterson said the fence would be useful because the couple is expecting a child in October.

"We're very happy he could do this," Peterson said.

Columbia Board of Realtors President Carol Van Gorp said since the beginning of March, 14 percent of homes sold in Columbia used the tax credit.

Van Gorp said the credit could be useful for college-aged homebuyers that seek to leave rental properties. She said it was not uncommon for the parents of students to buy houses in the names of their children so that they can cash in on the credit.

Van Gorp said the program would help stimulate the economy, not only by moving sluggish housing sales, but also through the purchase of consumer goods and the collection of sales tax.

"We need housing to recover so that the economy can recover," Van Gorp said.

According to data released by the Kaiser Family Foundation, the rate of foreclosures in Missouri was lower than the national average. According to the National Association of Home Builders, there was an increase in new home sales in the U.S. in March, up almost 20,000 new homes from 331,000 sold in January. In March 2008, though, 513,000 homes were sold in the U.S.

Andi Benson, a spokeswoman for the Missouri Housing and Development Commission, said 97 home sales have closed using the credit, and an additional 257 are being processed. She said 47 of the cleared sales went to owners in their 20s.

Benson said the loan was intended to help first time homebuyers pay their down payments and closing costs.

"Most of us don't have that kind of money laying around," Benson said.