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The US House of Representatives last week passed a bill that extended the $8,000 first time home buyer tax credit next year for military, diplomatic and intelligence personnel who are serving overseas. This increases the probability that Congress will agree to an extension or even extend the entire credit program well into 2010.

The White House is also signaling that it sees the tax credit program which is currently set to expire by December 1st as an important element in stimulating new jobs next year.

After an economic policy strategy meeting last week between President Obama, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, congressional aides said Democrats generally support an extension of the housing credit.

Senator Reid already has made clear that he is supportive of an extension and is co-sponsoring a Senate bill that would extend the tax credit for six months.

Congressman Charles Rangel, chairman of the House Ways and Means Committee, has sponsored the one-year extension of the tax credit for military and other government personnel serving overseas, and is favoring an extension for the entire program. Although the White House has not publicly committed to an extension, it is reported that the President is seriously examining that option.

An unexpected development that emerged following last week’s White House meeting was the possibility of expanding the tax credit to a broader group of buyers next year, such as people who sell their current homes and buy a replacement home.

Though details were scanty, Capitol Hill sources said one option on the table would be to provide a tax credit, most likely at the $8,000 level to replacement home buyers whose incomes do not exceed some limit.

The current credit phases out for single taxpayers with incomes above $75,000, and married purchasers earning $150,000.

A politically sensitive issue, the sticking point is how to manage the cost of extending the housing tax credit and how much it would add to the federal budgetary deficit.

Mark Zandi, chief economist of Moody’s estimates that widening the credit to all buyers through next August could cost the government upwards of $30 billion.

Rangel’s 12-month extension of the credit for service personnel is estimated to cost more than $30 billion, but it’s mainly being paid for through an increase in penalties levied by the IRS on taxpayers who fail to file corporate or partnership returns.

This article is an edited version of an article by Kenneth R. Harney from Washington