Sellers wishing to sell their home and buy another have been asking me if they need to sell before purchasing another home to get the credit. The answer is "NO". If you can obtain financing for the new home until you sell the other that is one way. The other, which is a little more difficult in the current housing market is to to do a contingency. If your home is priced right and in top shape to sell, you should be able to manage this.
According to the Internal Revenue Service, you do not have to sell your current house which must have been owned and used as a principal or primary residence for at least five consecutive years of the eight year period ending on the date of purchase of a new home as a primary residence in order to take advantage of the new $6,500 tax credit for repeat homebuyers so long as the new house becomes your primary house.
There are, however, some additional limitations. While you do not have to purchase a home that is more expensive than your current home to qualify for the credit, if your new home costs more than $800,000, you are not eligible for that credit.
There also are income limitations. For single taxpayers, you cannot make more than $125,000 annually; for married couples, you cannot earn more than $225,000 if you file a joint tax return. There is a phase-out until your income reaches $145,000 for a single taxpayer or $245,000 for joint tax filers. This means the credit is reduced proportionately until you reach the ceiling cap.
Yo cannot purchase the new home from family members, which includes parents, grandparents or children.
Finally, the purchase must take place by April 30, 2020. However, if you have entered into a binding contract before that date, you must close escrow by June 30, or you will lose this credit.
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