No doubt by now you’ve heard about the tax credit available to first-time homebuyers. Although much confusion still abounds about this credit, buyers are starting to get it, and are realizing that they need to act soon to benefit from it. However, if you’ve lived in your present home for some time and are looking for a change, you also may be eligible for a tax credit, even though you don’t meet the layperson’s definition of a “first time homebuyer.”
If you have owned a home and have lived in it as your principal residence for any consecutive period of 5 years during the past 8 years, but are purchasing a new home, under the Worker, Homeownership, and Business Assistance Act of 2009 (“WHBA”) you are considered a first-time homebuyer. The credit is a bit different from that available to “true” first time homebuyers - the available maximum credit is $6,500 (but, depending on the purchase price of your new home, you may not be eligible for the complete $6,500), rather than the maximum $8,000 available to true first-time buyers. There are also restrictions on who may take the credit. You are not eligible for the credit if:
- You make more than $125,000 (single), or $225,000 (married couple filing joint return). As an aside, if you make more than this, there are some circumstances where you can take a scaled credit, but you’ll need to talk to a tax advisor about this.
- If the purchase price of the place you want to buy now is more than $800,000.
- Both spouses do not meet the consecutive 5 year residency requirements.
Keep in mind that the credit is not something that you will see right away or reduce the amount of money you need to complete the purchase, as you don’t claim the credit until you file your taxes - you claim it on your federal income tax return.** I know this is a point that not everyone catches, and it’s important to keep in mind when evaluating your ability to purchase right now. Note, however, that it IS a credit, meaning that it will reduce the amount of tax you owe dollar-for-dollar, which is much better than simply receiving a deduction.
And, of course, one of the most important things to remember about this credit is that the deadline for buying a home so you can claim it is approaching soon! You must be under contract on the new home no later than April 30, 2010, with a closing date no later than June 30, 2010.
For any of you law and code geeks out there, here’s a great page to read the full text of the WHBA: http://www.govtrack.us/congress/billtext.xpd?bill=h111-3548. Section 11 onwards is the relevant part.
If you are a long-time homeowner who is looking to buy a new home in Boulder County, CO, please give me a call to start your search!
**POST EDIT: Please see comment below. There are some instances where you may apply credit to closing costs or down payment, but you need to work with lender, tax professional and/or attorney to see if this would be for you.
Legal disclaimer: This blog is intended to be for general informational purposes only - it does not create any attorney-client relationship, and it’s not legal advice. The law may be different where you live, and every situation is different. Contact a lawyer (or tax professional) licensed in your state directly to assess your individual situation. Thanks for reading!
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