Homebuyer Tax Credit Changes
HOMEBUYER TAX CREDIT EXTENDED, EXPANDED
President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday Nov. 6, 2009. The program has been extended trhrough April 30, 2010 and it's been expanded to include current homeowners. The credit for first time buyers is $8,000 and it is $6,500 for current homeowners. Eligibility will be limited to an income of $125,000 for individuals and $225,000 for married couples. There is also a limit on the price of the home you can buy - $800,000 - which wasn't the case before.
The $8,000 credit was scheduled to lapse on Dec. 1, 2009 but will now be in effect through the end of June 2010. Homebuyers must sign a contract before April 30, 2010 and close by June 30, 2010.
The bill also made more homeowners eligible to claim the credit on their taxes. First time buyers - those who have not owned a home in the past three years - still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June 2010.
WATCH: RE/MAX VIDEO ABOUT HOMEBUYER TAX CREDIT CHANGES
WATCH: IRS VIDEO ABOUT HOMEBUYER TAX CREDIT CHANGES
NAR Frequently Asked Questions - Homebuyer Tax Credit Changes
Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6,500 credit.
Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a hew home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. i will go to settlement on November 20, 2009. Will I qualify for the new $6,500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill was signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.
Question: 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. Will I be eligible for a credit?
Answer: Yes. The new income limitations went into effect as soon as the President 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. Since 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).
Question: 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 $825,000. Will I be able to use any of the $6,500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. An amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.
Question: I owned my home for 10 years, but sold it two years ago and have been renting since. If i purchase a home, will I be eligible for the $6,500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6,500 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.
Question: 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?
Answer: You do not have to close before December 1, 2009. Since the legislation has been signed, it will be as if the November 30, 2009 date had never existed. Therefore, so long as the contract settles before April 30, 2009 (or July 1, 2009, worst case), the purchaser will be eligible for the credit.
