Tax Credit For Existing Home Owners
Not only has the first time homebuyers tax credit been extended, but it has been expanded to include up to $6500 for some current homeowners as well.
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Q: Existing homeowner tax credit: What are the requirements?
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A: Here are some of the main points.
- $6500 per couple, or $3250 married filing separately.
- Must have lived in home for 5 of the past 8 years.
- Income limits of $125000 individual, $250000 married phase out at $20000.
- Must have written, binding purchase agreement signed by April 30,2010. Will have 60 days to close.
- $800000 limitation on home purchase price.
- Purchaser must attach documentation of purchase to tax return.
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Q: Existing homeowner tax credit: Must the new house cost more than the old house?
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A: No. For example, if you move from a high cost area to a lower cost area and meet all of the eligibility requirements you will qualify for the $6500 credit.
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- Q: I am an existing homeowner. I signed a contract to purchase a new home last month. I've lived in my current home for more than 5 consecutive years and am within the new income limits. My closing date is next month - will I qualify for the new $6500 tax credit?
- A: 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.
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- Q: 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?
- A: 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).
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- Q: 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?
- A: 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.
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- Q: 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?
- A: 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,
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- Q: 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?
- A: 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.
This information was found through the National Association of Realtors Government Affairs Division. All information is deemed to be correct. Please contact Linda at www.mikeandlindahale.com to clarify any questions you may have.
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