New Extended and Expanded Income Tax Credit
On November 6, 2009 President Obama signed a bill to both Extend and Expand the Home Buyer Tax Credit. Not only will it be available until Spring of 2010 for First Time Buyers, but it now also includes credits for current homeowners who sell their existing residence and purchase a new one prior to April 30, 2010. So who qualifies and what are the details?
Here are some of the highlights:
How do you apply for the tax credit? You can claim the tax credit on your federal income tax return. Understand, this is a dollar-for-dollar credit, not a tax deduction. If the credit exceeds your tax liability, you will receive a refund. If you've already filed your taxes, you won't need to wait until the following year -- simply file an amendment. We've seen buyers receive the tax credit as soon as 30 days after filing the amendment. This will help offset some of the closing fees or equity shortages for existing homeowners in today's market. In addition, you will be purchasing a new home at a great price for an interest rate still hovering around 5%.
To help clarify some of the details, we've included answers to a few commonly asked questions. For the Existing homeowner credit, must the new house cost more than the old house? No. For example individuals who move from a high cost area to a lower cost area, who meet all eligibility requirements will qualify for the $6500 credit. I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a non-negotiable price of $825,000. Will I be able touse any of the $6500 tax credit? No. The $800,000 cap on the cost of te purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. 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 $6500 tax credit if I meet all of the other eligibility tests? Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 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 then doesn't impact eligibility. I will be closing on my existing home in December after owning it over 5 years. I am getting remarried in January to a man who currently owns a home for only 2 years. We will be purchasing a new home together. Will we qualify? No Both spouses must qualify independently of each other. However, if you were to get married after the closing which takes place prior to July 2010, then Yes ou would qualify even with him on the loan. One non married person can qualify for the entire $6500 even if the other person on the loan will not qualify. I am an existing homeowner. On October 25, 2009 I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. We are closing on November 20. Will I qualify for the new $6500 tax credit? Yes. The existing homeowner credit goes into effect for purchases as of November 6, 2009. 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. If the new rules were signed into effect prior to my closing, will I be eligible for a credit? Yes. The new income limitations are in effect as of the date the bill was signed, November 6. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the closing date. So if you close after November 6, you should be eligible for the credit (or a portion of the credit if you're within the phase-out range). NOTE OF DISCLAIMER: Consult your Attorney, CPA and/or Tax Preparer for the legal or tax impact and consequences of this tax credit. The Hoagland Team is providing this information for general guidance only. Many of answers were supplied by the NAR Government Affairs Division Publication. This information does not constitute the provision of legal or tax advice, or professional consulting of any kind. Before making any decision or taking any action on this information, you should consult a qualified professional advisor. This information is provided “as is” with no assurance or guarantee of completeness, accuracy, or timeliness. |