The extended and expanded tax credit

I'm sure many of you have been hearing all about the First Time Home Buyer Tax Credit offered earlier this year. The credit was supposed to expire at the end of this year. But thanks to many in our industry pushing for more time and more benefits,  The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. It also authorized a tax credit of up to $6,500 for qualified repeat home buyers.  So what does this mean to you? Let me break it down:

Let's start with the First Time Homebuyer.

    If you have not owned a principal residence in the 3 years prior to purchasing any kind of home -new or resale- you may qualify. You must purchase the home on or after January 1, 2009 and on or before April 30, 2010. However, the law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.

    The actual credit amount depends on the price of the home. It's equal to 10% of the purchase price up to a maximum of $8000. Any home, as long as the purchase price is equal to or less than $800,000. There are income limits, for homes purchased after November 6 and  before April 30, 2010; $125,000 for single taxpayers and $225,000 for married couples filing jointly. The credit is also refundable. This means if the home buyer qualifies, the credit can be claimed even if the taxpayer has little or no federal income tax liability to offset.

   

  

Now for the repeat buyers.

To qualify for this tax credit, buyers  who have owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

The amount of credit is 10% of the purchase price up to $6500, again, as long as the purchase price is equal to or less than $800,000. Income limits are $125,000 for single taxpayers and $225,000 for married taxpayers filing joint returns.

Some interesting facts on both:

--Married couples are not eligible to claim the first-time home buyer tax credit if either spouse has previously owned a home. They may, however, qualify for the repeat home buyer tax credit.

--Neither the first-time home buyer tax credit nor the repeat home buyer tax credit have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.

--Taxpayers must submit a copy of the HUD-1 settlement statement and IRS Form 5405 to claim either the first-time home buyer tax credit or the repeat home buyer tax credit.

--Home purchases from relatives of the taxpayer or the taxpayer’s spouse do not qualify for the tax credit. The IRS defines relatives as ancestors (parent, grandparent, etc.), lineal descendants (child, grandchildren, etc.) and spouses.

There are also exceptions for members of the military, foreign service, and intelligence community

Exemption From Tax Credit Recapture Rules

• Typically, homes that are sold or that cease to be used as a principal residence within three years of the initial purchase are subject to recapture of the tax credit.
• However, qualified service members who sell or move from a tax credit home within three years of the initial purchase due to official extended duty are exempt from the recapture rule.

Extension of Tax Credit Deadlines

• The home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010.
• However, for qualified service members who are ordered on a period of official extended duty, these dates are extended for one year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011.

Every buyer is different, so speak to your tax preparer to see if you qualify. Then, if you are ready to buy, for the first time or the fifth, call me! Together we'll find the perfect home for you!

Information taken from federalhousingtaxcredit.com