Congress has now passed new legislation that extends and expands the home buyers tax credit. The bill extends the First Time Home Buyer Tax credit of up to $8,000 to first-time home buyers until April 30th, 2010. The bill will also expand the tax credit to included current home owners purchasing a new or existing home between November 7th, 2009 and April 30th, 2010.
To qualify for the extended First Time Home Buyers Tax Credit purchasing between November 7th, 2009 and April 30th, 2010 purchasers and/ or their spouse may not have owned a home in the past three years prior to purchase. To qualify for the expanded tax credit current home owners purchasing a home between November 7th, 2009 and April 30th, 2010 must have used the home being sold as a principal residence 5 consecutive years out of the last 8 years.
Who Qualifies for the Extended Credit?
· First-time home buyers purchasing homes between November 7, 2009 and April 30, 2010 qualify for the extension.
· Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight qualify for the expanded tax 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.
What Properties Are Considered Eligible for the Tax Credit?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How Much Is Available?
The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.
How Much is the Tax Credit?
Each home buyer’s tax credit is determined by two additional factors:
1. The price of the home.
2. The buyer's income.
Price
The Extended Home Buyer Tax Credit has a limit on eligibility of homes that are purchased for $800,000 or less.
Buyer Income
Single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009.These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits.
What If the Buyers Income Exceeds The Limits? Is there still a Credit?
Yes, in the case of exceeding income limits, some buyers may still be eligible for the credit.
The credit is decreased for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as the buyers income approaches the maximum limit. Home buyers that earn more than the maximum qualifying income over $145,000 for singles and over $245,000 for couples are not eligible for the credit.
Can a Buyer Still Qualify If the Buyer Closes After April 30, 2010?
The Extended Home Buyer Tax Credit allows for a closing after April 30th as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
Will the Tax Credit Need to Be Repaid?
No, the buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.
Chart Highlighting the comparision between the prior tax credit and the extended and expanded tax credit
Frequently Asked Questions
Source: NAR 2009