President Obama has signed a bill that extends the tax credit for first-time. The current program had been scheduled to expire on November 30, 2009. In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
The extension measure also offers opportunities for some who are not buying a home for the first time.
The $8000 tax credit program that has existed for first time homebuyers remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.
Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Higher Income Caps are now in effect. The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
Qualifying buyers may purchase a property with a maximum sales price of $800,000.
What is the tax credit for first-time homebuyers? An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is eligible for the first time homebuyer tax credit? Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
Are there other restrictions to taking the credit? Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.
-You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
-You do not use the home as your principal residence.
-You sell your home before the end of the year.
-You are a nonresident alien.
-You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
-Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
-You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.
If you have any questions related to the first time homebuyer credit that we did not cover here, please speak with your accountant. We are real estate agents and cannot give you tax advice. If you need a referral to an accountant/CPA, please contact us, we can refer one to you.
Kerstin G. Brooks
Brooks & Heinze Team
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Kerstin G. Brooks, Broker 