Home Buyer Tax Credit Extended -- Not Just for 1st Timers This Time

By
Real Estate Broker/Owner with Fitzgerald Realty, Inc.
On November 9, President Obama signed an extension of the Home Buyer tax credit as part of a $24 billion economic stimulus bill that will also extend unemployment benefits. The tax credit applies to new and resale homes.

There are some significant changes to the tax credit that was due to expire at the end of this month. Namely, the new tax credit is for first time home buyers (anyone who has not owned a home in the previous 3 years) who purchase a home by April 30, 2010 or by June 30, 2010 when a binding purchase agreement was in place by April 30, 2010.

The tax credit is equal to 10% of the purchase price up to a maximum of $8,000 and is refundable meaning you can get the money back even if your tax bill is less than the amount of the tax credit. The income limits were increased to an Modified Adjusted Gross Income (MAGI) of $125,000 for individuals or $225,000 for joint filers. The credit phases out by 10% by every $2,000 you make over these limits. The law allows some flexibility as to the tax year you use to calculate your MAGI.

The tax credit is only good for purchases under $800,000, but it does apply to all types of homes including detached houses, townhomes, condos, manufactured homes, and houseboats. The home must meet the definition of a primary residence used to determine the $250,000/$500,000 capital gains exemption. You can also apply the tax credit to a home you build on land that you already own.

Repeat Home Buyer Tax Credit

There’s also a new twist that provides a tax credit to repeat buyers defined as those who have lived in their current primary residence during 5 of the 8 years directly before the sale. The tax credit is equal to 10% of the Purchase Price up to $6,500. Otherwise, the same guidelines as the $8,000 New Home Buyer tax credit apply to the Repeat Home Buyer Tax Credit.

You may be able to access your tax credit before you file your next return by reducing your federal income tax withholding. For FHA-insured mortgages, HUD is also allowing the tax credit to be monetized at closing to pay certain down-payment and closing expenses. Non-profits and FHA lenders may extend short term loans of up to $8,000 to monetize the tax credit at closing. In some cases these short term loans may qualify to meet the FHA’s 3.5% down-payment requirement.

Check with your financial adviser if you believe you qualify — more information is available at http://www.federalhousingtaxcredit.com/.

Comments (1)

Robbie Young - Home Loans California
Wells Fargo Home Mortgage - Conforming, Jumbo, FHA VA Loans - Sonoma, CA

Thanks for posting this Mike.  Cheers from the Wine Country!

Nov 23, 2009 04:18 PM