Sen. Johnny Isakson — a former real estate broker known for taking up industry causes — has signed onto a bill that would extend, but not expand, the current $8,000 tax credit for first-time homebuyers, which is set to expire Nov. 30.

Isakson, a Georgia Republican, had previously introduced a bill that would more than double the tax credit’s ceiling to $15,000, and expand the pool of those eligible to claim it by lifting first-time homebuyer and income restrictions.

Sen. Johnny Isakson — a former real estate broker known for taking up industry causes — has signed onto a bill that would extend, but not expand, the current $8,000 tax credit for first-time homebuyers, which is set to expire Nov. 30.

Isakson, a Georgia Republican, had previously introduced a bill that would nearly double the tax credit’s ceiling to $15,000, and expand the pool of those eligible to claim it by lifting first-time homebuyer and income restrictions.

That bill, S 1230, has 16 co-sponsors, including Sen. Chris Dodd, D-Conn., the chair of the Senate Banking Committee. It would be in effect for one year after enactment.

Isakson introduced a similar bill last year, which the Congressional Budget Office estimated would cost $34.2 billion.

Housing industry groups are lobbying hard for a tax credit that’s not limited to first-time homebuyers. The National Association of Realtors claims the existing tax credit has brought 1.2 million new buyers into the market, 350,000 of whom would not have purchased a home otherwise.

But the cost of expanding the credit — or even extending the existing one — remains a concern to many lawmakers.

The Obama administration has yet to signal its support for an extension. A White House spokesman said this week that the president’s economic team is evaluating the tax credit’s impact on home sales, and will make a recommendation to the president.

Seeing the potential need for a compromise, Isakson this week signed onto another bill, S 1678, that would take the less ambitious step of simply extending the existing tax credit to June 1, 2010. …CONTINUED

Introduced Wednesday by Sen. Benjamin Cardin, D-Md., S 1678 has the support of Sen. Debbie Stabenow, D-Mich., and both of Nevada’s Senators, Republican John Ensign and Democrat Harry Reid.

Congress had allocated $13.6 billion for the current first-time homebuyer tax credit program in the hopes of generating 2 million home purchases.

The Internal Revenue Service says 1.4 million first-time homebuyers have claimed the credit, and is reminding potential homebuyers that unless Congress extends the program, they must close on a home purchase by Nov. 30.

"Because the credit is only in effect for a limited time, those considering buying a home must act soon to qualify for the credit," the IRS said in a press release echoing similar reminders from the housing industry.

The IRS has even created a YouTube video to explain the credit, which is equal to 10 percent of a home’s purchase price and may be claimed by homebuyers who fall within income restrictions and have not owned a primary residence in the last three years.

The existing tax credit phases out for married couples filing joint returns with adjusted income of between $150,000 and $170,000. In other words, those earning $150,000 or less can claim the full credit, while those earning more than $170,000 can’t claim it at all. For single taxpayers, the credit phases out between $75,000 to $95,000.

The IRS also warned homebuyers to avoid schemes that help ineligible people file false claims for the credit. The IRS said it is investigating a number of cases of potential fraud and is using computer screening tools to identify questionable claims for the credit.

In July, the IRS said a Jacksonville, Fla.-based tax preparer, James Otto Price III, became the first to be convicted of fraud related to the federal first-time homebuyer tax credit (see story).

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