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Buyers
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Homebuyer
Tax Credit ENDS APRIL
30th
Highlights
of this credit include:
•
For first time homebuyers: $8,000.
Extended.
•
For
move up homebuyers: $6,500. Current homeowners are now eligible if you have
lived in your current home for 5 or more consecutive years during the 8
year period ending on the date of purchase of their subsequent principal
residence. You don't have to sell your
existing house.
•
Households
who have binding contracts in place by April 30, 2010 will be allowed an
additional 60 days to complete their transaction.
•
Single
taxpayers with income up to $125,000 and married taxpayers with income up
to $225,000 qualify for the full amount of the credit.
•
Legislation
placed an $800,000 cap on the home sale price.
Here are
some of the most frequently asked questions on the changes to the
Homebuyer Tax Credit
Question: Existing homeowner
credit: Must the new house cost more than the old house?
Answer: No. Thus, 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.
Question: 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. I will go to settlement on November
20. If resident Obama has signed the bill by the time I go to settlement,
will I qualify for the new $6500 tax credit?
Answer: Yes. The existing
homeowner credit goes into effect for purchases after the date of
enactment (when the bill is signed). There is no reference to the date of
contract for the new credit. The provision looks solely to the date of
purchase, which is generally the date of settlement.
Question: 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. I will be covered,
however, by the new income limits. If the new rules have been signed into
law by the time I go to settlement, will I be eligible for a credit?
Answer: Yes. The new income
limitations go into effect as soon as the President has signed the bill.
The income limit and other eligibility rules will look to your status as
of the date of purchase, which is the settlement date. So if the new rules
have been signed when you go to settlement, you should be eligible for the
credit (or a portion of the credit if you're within the phaseout range).
Question: I am an eligible
existing homeowner. I have a fair amount of equity in my home. I have
found a home with a nonnegotiable price of $825,000. Will I be able to use
any of the $6500 tax credit?
Answer: No. The $800,000 cap
on the cost of the purchased home is firm at $800,000. Any amount above
$800,000 makes the home ineligible for any portion of the credit. The
$800,000 is an absolute ceiling.
Question: I owned my home for
10 years, but sold it two years ago year and have been renting since. If I
purchase a home, will I be eligible for the $6500 tax credit if I meet all
the other eligibility tests?
Answer: 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 3 years doesn't impact eligibility.
Question: I am an eligible
first time homebuyer. I entered into a contract to purchase on November 1,
2009. Do I have to go to closing before December 1? How does the extension
date affect me?
Answer: You do not have to
close before December 1. Once the legislation has been signed, it will be
as if the Nov 30 date had never existed. Therefore, so long as the
contract settles before April 30 (or July 1, worst case), the purchaser
will be eligible for the credit.
Please
contact your tax professional for additional guidance on how this credit
may affect you.
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