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IRS Issues Guidance for Homebuyers Who Want to Take Advantage of Tax Credit Extension; Meanwhile No Progress on Fannie and Freddie

2 min readBy: William Ahern

The IRS has a helpful web page for all homebuyers who plan to claim the homebuyer tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. on their income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. returns, and today the service updated the page to reflect Congress's action late on June 30 to extend a closing deadline for the program.

June 30 had been the final deadline for closing on a home sale for everyone who wanted the tax credit and had met the April 30 deadline for entering into a binding contract on a home sale. But at the last minute, Congress added 90 days, extending it to September 30 because real estate agents had complained that many purchasers who did meet the April 30 deadline were going to miss the June 30 closing deadline. Some observers predicted a high rate of fraud, asserting that people would backdate contracts entered into after April 30.

Whether fraudulent or legitimate, temporary tax credits for housing are just the same old congressional idea: to act as if they're solving a problem when they're actually just funneling taxpayers' money to powerful special interests like real estate agents, homebuilders and mortgage lenders.

It's particularly galling to see Congress twiddling its thumbs on the Fannie Mae/Freddie Mac fiasco. These mortgage goliaths — once called "government-sponsored enterprises" – are now not much different from regular government agencies.

They're losing money at an astonishing rate, and they're still hiring!

You wouldn't expect an aggressive hiring campaign at an agency that has recently:

  • contributed mightily to the economy's downfall by buying bad loans
  • lost about $142 billion in taxpayer money over the last year
  • been delisted from the stock exchange
  • had CBO predict that they would continue losing money that may total $389 billion

And perhaps that CBO estimate of $389 billion is too low. CNBC is quoting housing experts who fear it may reach $1 trillion.