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
President 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 firsttime
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 firsttime
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.
( reprinted with permission of NAR )
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