Home Buyer Tax Credit Expanded to Include Move-Up Buyers.
The Senate and House of Representatives have passed the extension of the First Time Home Buyer Tax Credit and have added a new provision that allows move up buyers to get a $6,500 credit if they have lived in their previous home at least five years.
The major changes from the previous version are as follows:
- The tax credit sunsets on April 30, 2010. However those that have contracts dated on or before April 30 would still qualify IF transaction closes within 60 days.
- INCOME LIMIT IS RAISED from $125,000 for single, to $225,000 for a couple.
- A new $6,500 credit is available for move-up buyers that have lived in their homes for at least 5 years.
- Members of the military who have served overseas for 90 days or more in 2008 or 2009 can claim the credits until April 30, 2011.
- Re-payment of credit not required if the property is the primary residence for at least 36 months.
- Credit can be claimed on the 2009 Federal Tax Return.
- For those purchasing in Georgia, there is an additional $1,800 tax credit.
- The cost of the home may not exceed $800,000 to qualify for federal credits.
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Question
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Answer
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Existing homeowner credit: Must the new house cost more than the old house?
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No. For example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.
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I am a first time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
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Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you're within the phaseout range).
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I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable
price of $820,000. Will I be able to use any of the $6500 tax credit?
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No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.
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I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
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Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is "consecutive." As long as he lived in that house for 5 years straight what he did since 3 years doesn't impact eligibility.
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I am an eligible first time homebuyer. I entered into a contract to purchase on
November 1, 2009. Do I have to go to closing before December 1? How does the
extension date affect me?
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You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.
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The table above is based on information provided by the National Association of REALTORS.
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