Tax Administration:

Usage and Selected Analyses of the First-Time Homebuyer Credit

GAO-10-1025R: Published: Sep 2, 2010. Publicly Released: Sep 2, 2010.

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As an important part of the economic stimulus efforts, Congress enacted the First- Time Homebuyer Credit (FTHBC) to assist the struggling real estate market and encourage taxpayers to purchase their first homes. Congress enacted different versions of the FTHBC--as part of the Housing and Economic Recovery Act of 2008 (Housing Act); the American Recovery and Reinvestment Act of 2009 (Recovery Act); and the Worker, Homeownership, and Business Assistance Act of 2009 (Assistance Act). The dollar amounts that can be claimed and rules associated with the credit, including potential repayment, vary depending on the version. Joint Committee on Taxation estimates suggest that the three FTHBC provisions combined may result in total revenue losses to the federal government of about $22 billion through 2019. In response to the request for updated information on the use of the FTHBC, our objectives were to identify (1) the number of FTHBC claims and dollar amounts claimed for each credit version by state and (2) state rankings, using selected statistics, such as the total dollar amount of FTHBC claimed in each state.

Through July 3, 2010, IRS reported the following: (1) About 1 million claimants claimed $7.3 billion in interest-free loans through the Housing Act provision. These claimants will begin repaying their loan beginning next tax filing season, which starts in January 2011. (2) About 2.3 million claimants claimed a total of $16.2 billion using both the Recovery Act and Assistance Act provisions. Of these claimants: (1) About 1.7 million claimed about $12.1 billion using the Recovery Act provision This represents half of all claims, making it the most frequently used version of the FTHBC. (2) Nearly 600,000 claimed about $4.1 billion using the Assistance Act provision. Of these, close to 400,000 claimed about $2.9 billion using the first-time homebuyer option and nearly 200,000 claimed $1.2 billion using the long-time homeowner option. These numbers in particular are likely to increase because IRS is still processing FTHBC returns and this version can be claimed on tax returns filed during the 2011 filing season. State rankings vary depending on the statistic used for analysis and may change as IRS continues to process FTHBC returns. The three statistics we selected--total dollar amount claimed, dollar amount claimed per resident, and average dollar amount claimed per FTHBC claim--illustrate how the results can vary.10 Thus, as the following examples illustrate, care should be taken to select measures appropriate for a particular purpose. (1) California, the most populous state in the country, ranked 1st with the most FTHBC dollars claimed under the Housing Act provision, as well as under the combined provisions of the Recovery and Assistance Acts. However, California ranked 32nd and 29th in the amount of FTHBC claimed per resident under the Housing Act provision and under the combined provisions of the Recovery and Assistance Acts, respectively. (2) Nevada ranked 1st in the amount of FTHBC claimed per resident under the Housing Act provision, as well as under the combined provisions of the Recovery and Assistance Acts. However, Nevada ranked 26th and 24th in the amount of FTHBC dollars claimed under the Housing Act provision and under the combined provisions of the Recovery and Assistance Acts, respectively. (3) Utah ranked 1st in the average dollar amount of FTHBC claimed per claim under the Housing Act provision, as well as under the combined provisions of the Recovery and Assistance Acts. However, Utah ranked 29th and 30th in the amount of FTHBC dollars claimed under the Housing Act provision and under the combined provisions of the Recovery and Assistance Acts, respectively. We are not making any recommendations, as, at our request, IRS took action during our review to segregate data by credit version which should provide more accurate information as a basis for more effective enforcement. Having FTHBC data in this format is critical for effective enforcement, since claimants are subject to different rules and requirements depending on the version of the credit.

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