$8,000 FIRST TIME HOMEBUYER TAX CREDIT EXTENDED!
On November 6, 2009, H.R. 3548 was signed into law by the president. This bill provided a federal extension of unemployment insurance along with the extension of the First Time Homebuyer Credit. Also enacted was a new $6,500 tax credit for taxpayers who have lived in the same principal residence for five of the last eight years. Here is a brief outline of some of the changes:
1. The expiration date for the $8,000 tax credit is now available for taxpayers who enter into a binding written contract by April 30, 2010 and close on the purchase by June 30, 2010. In this case the maximum tax credit available would remain at $8,000, or $4,000 if married and filing separately;
2. For taxpayers who have lived in the same principal residence for five of the last eight years, they will be treated as a first time homebuyer eligible for the homebuyer tax credit. In this case the maximum tax credit available would be $6,500.
3. The income limits for full qualification are being raised from $75,000 for single taxpayers and $125,000 for married taxpayers to $125,000 for single taxpayers and $225,000 for married taxpayers. The benefit of the credit phases out for taxpayers whose income exceeds these limits;
4. The credit will now be available for homes with a purchase price of $800,000 or less;
5. For the existing homeowner credit, there is no requirement that the new home cost more than the old one, just that the contract be entered into on or before April 30, 2010 and close before June 30, 2010.
6. 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.
7. A purchaser cannot buy a home from a blood relative and be eligible for the tax credit. However, a purchase can be made from a step-relative, provided they are not related by blood.
Remember, a tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed.
With an extension and expansion of the credit, with housing prices at their most affordable levels in years, and interest rates remaining at historic lows of around 5%, the environment remains very attractive for those interested in purchasing a home. For those interested in taking advantage of these positive factors in the housing market, acting quickly will be advantageous, because as the economy continues to expand, it is likely that mortgage interest rates will rise in the near future. For more information on the tax credits or to see if you qualify for this limited opportunity, contact your real estate professional today.