THE EXPANDED HOME BUYER TAX CREDIT COULD CHASE
THE EXPANDED HOME BUYER
TAX CREDIT COULD CHASE
AWAY THE WINTER BLUES
This column is brought you by the NAR Real Estate Services group By Ken Trepeta
This column is broughtto
you by the NAR Real Estate
By Ken TrepetaAs we begin 2010, both real estate professionals
and home buyers have something to look forward
to and, more importantly, take advantage of-the
extended and expanded home buyer tax credit.
Originally created in 200S, the home-buyer tax credit
has evolved from a $7,500 credit, which had to be repaid
by the home buyer over the course of 15 years,
to an $8,000 tax credit with no repayment required
in 2009. Now, for a limited time in 2010, the $8,000
home buyer tax credit will still be available to first-time
home buyers and certain current homeowners will also
be eligible for a $6,500 credit.
To help everyone better understand the extended
and expanded home buyer tax credit, here are some
highlights of the changes.
Who Can Claim the Credit?
First-time home buyers who purchase homes between
November 7, 2009 and April 30, 2010 are eligible for
the credit. To qualify as a "first-time home buyer," the
purchaser or his/her spouse may not have owned a residence
during the three years prior to the purchase.
For current homeowners purchasing a home during
the same time frame, they are also eligible for a
tax credit, so long as the home being sold or vacated
was their principal residence for five consecutive years
within the last eight. To elaborate, it must be the same
home; it is not enough that they have been homeowners
for five consecutive years, they must have been in
the same home for five consecutive years.
Another key point is that the existing home does not
need to be sold. One must, however, occup}' the new
home as a principal residence and do so for three years
or risk recapture of the credit. Also, the new home does
not need to cost more than the old home despite the
concept that it is directed at "move-up" buyers.
How Much Is the Credit and What Are the Income limits?
The maximum allowable credit for first-time home
buyers is $8,000 or lO(i'b of the sales price, whichever
is less. For current homeowners, it is $6,500 or 10% of
the sales price, whichever is less. Under the extended
home buyer tax credit, single buyers with incomes lip
to $125,000 and married couples with incomes up to
5225,000 may receive the maximum credit.
The credit decreases for single buyers who earn between
$125,000 and $145,000 and between $225,000
and $245,000 for home buyers filing jointly. The
amount of the tax credit decreases as his/her income
approaches the maximum limit. Home buyers earning
more than the maximum qualifying income--over
$145,000 Ior singles and over S245,OOOfor couplesare
not eligible for the credit.
What Are the Deadlines for Qualifying for the Credit?
Under the extended home buyer tax credit, as long as
a written binding contract to purchase a home is in effect
011 April 30, 2010, and the deal is closed by July 1,
2010, one can claim the credit.
Will the Tax Credit Need to be Repaid?
No, the buyer does not need to repay the tax credit
if he/she occupies the home for three years or more.
However, if the property is sold during this three-year
period, the full amount of the credit will be recouped
on the sale. Another provision of the law waives the
recapture provisions for service members who receive
orders that require them to move.
Are There AnyOther Critical Provisions?
There are three provisions people should be aware of:
- There is an $1')00,000 limitation on the cost of the
- The purchaser must be at least 18 years old on the
date of purchase.
- For a married couple, only one spouse must meet this
age requirement and dependents are not eligible to
claim the credit.
For more information, including the required IRS
forms, please contact the Internal Revenue Service at
Ken Trepeta the Real Estate Services program for the
Ken Trepetais the director of
the Real Estate Services program for the
RISMedia's REAL ESTATE 13