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Tax benefit aids homebuyers

BY PARKER SMITH | OCTOBER 01, 2009 7:20 AM

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Kym Wroble sat at her new kitchen counter listening to home inspector Alvin Miller detail his evaluation of her new condominium. The two-bedroom in North Liberty will soon be Wroble’s first home purchase.

And she’ll get $8,000 in return.

Time is running out for first-time buyers to enter the housing market with that boost. Iowa City real-estate agents said they expect the number of qualifying buyers to jump within the next month as people scramble to take advantage of the tax.

The American Recovery and Reinvestment Act, most commonly known as the federal stimulus package, has provided tax benefits to more than 1.4 million taxpayers so far nationwide, according to the Internal Revenue Service.

Despite her ongoing lease on an apartment in North Liberty, Wroble decided to jump on the tax incentive before it was too late.

“Ideally, I would have liked to have had a little more time to look at houses and other condos, but I had to weigh the pros and cons of buying sooner,” she said.

Wroble, who usually files her own taxes, said she’ll have an expert do them this year to ensure she’ll receive her incentive smoothly. Her biggest hurdle was subleasing her apartment, she said, but last week, a UI graduate student submitted an application to Wroble’s landlord.

“I really had to work to get my place leased out, time is a factor,” Wroble said. “I started the process with a financial planner, then I met with a lender at Hills Bank to get approved for a loan.”

Local real-estate agents said the tax credit has had a positive effect on the local housing market.

“It has a trickle up effect on the market, people who own the homes that first-time buyers are purchasing, can buy a new home themselves,” said Jeff Dill, president of the Iowa City Area Association of Realtors.

The credit is scheduled to end on Nov. 30, but the Associated Press reports that pressure to extend the credit is being applied by real estate lobbyists, realty agents, builders, lenders, and would-be buyers. However, no extension has been approved by federal lawmakers.

John Benson, a senior vice president for Hills Bank and Trust Co., said the bank would like to see the credit extended, and he believes that is the general consensus among lenders.

“It definitely has been keeping the purchase market going this fall,” Benson said. “Once the credit expires it could slow down activity.”

The credit is refundable and if the taxpayer has little or no federal income tax liability, the government will mail the credit to the taxpayer in a check. Homebuyers must then use the home as their principal residence for at least three years and claim the credit on their federal income tax return.

No pre-approval is necessary, and any type of home will qualify for the credit.


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