Homebuyer Tax Credit Changes, Frequently Asked Questions

NAR Frequently Asked Questions 

Homebuyer Tax Credit Changes 
National Association of REALTORS® Government Affairs Division 
500 New Jersey Avenue, NW, Washington DC, 20001 

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