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Expanded Home Buyer Tax Credit Update
For a limited time in 2010, the $8,000 the home buyer tax credit will still be available to first-time home buyers and certain current homeowners will also be eligible for a $6,500 credit.
First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010 are eligible for the credit. To qualify as a “first-time home buyer,” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
For current homeowners purchasing a home during the same time frame, they are also eligible for a tax credit, so long as the home being sold or vacated was their principal residence for five consecutive years within the last eight.
Key point being that the existing home does not need to be sold. One must, however, occupy the new home as a principal residence and do so for three years or risk recapture of the credit. Also, the new home does not need to cost more that the old home despite the concept tat it is directed at “move-up” buyers.
Maximum allowable credit for first-time home buyers is $8,000 or 10% of the sales price, whichever is less. For current homeowners, it is $6,500 or 10% of the sales price, whichever is less. Under the extended home buyer tax credit, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000 may receive the maximum credit.
The credit decreases for single buyers who earn between $125,000 and $145,000 and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income- over $145,000 for singles and over $245,000 for couples-are not eligible for the credit.
As long as a written binding contract to purchase a home is in effect on April 30, 2010, and the deal is closed by July 1, 2010, one can claim the credit.
The buyer does not need to repay the tax credit if he/she occupies the home for three or more years. If the property is sold during this three-year period, the full amount of the credit will be recouped on the sale. Special rules that apply to members of the military, the foreign service and the intelligence community see link below.
Three provisions people should be aware of:
1. There is an $800,000 limitation on the cost of the home.
2. The purchaser must be at least 18 years of age on the date of purchase.
3. For a married couple, only one spouse must meet this age requirement and dependents are not eligible to claim the credit.
Find out eligibility requirements, frequently asked questions, and more at:
www.federalhousingtaxcredit.com
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