You're not a new homebuyer...well, not exactly. After all, you want to buy a new home....But you're a "move-up" buyer, a "down-sizer", maybe a "right-sizer"...? What does the new tax credit package mean to YOU?
These home-buying potholes won't prevent you from taking advantage of the $8,000 first-time home-buyer's credit, so relax. A bill signed into law by President Obama extends the credit, originally scheduled to expire Nov. 30, until next spring. That gives you plenty of time to Google the neighbors before closing the deal.
•First-time home buyers.
The law defines "first-time home
buyer as someone who hasn't owned a home in the three years before the purchase. If your spouse owned a home in that time frame, you're not eligible. So, those eligible can claim a tax credit for 10% of the purchase price, up to a maximum credit of $8,000. The credit is refundable, which means that if you owe less than $8,000 in taxes, you'll receive a refund for the difference. The credit is not available for home purchases that exceed $800,000.
You can claim the credit if you sign a sales contract before May 1, 2010, and close before July 1. Members of the military who serve extended duty outside the USA have until July 1, 2011, to claim the credit, as long as they sign a contract before May 1, 2011.
The legislation also expands the income cutoffs for the credit. Single home buyers with modified adjusted gross incomes of up to $125,000 qualify for the full credit; those with MAGI of up to $145,000 can claim a reduced credit. For married couples who file joint tax returns, the credit phases out between $225,000 and $245,000. Previously, singles with MAGI of more than $95,000 and married couples with MAGI exceeding $170,000 were ineligible for the credit.
The credit doesn't have to be repaid unless you sell your home within three years.
•Existing homeowners. Home buyers who have lived in their current home for five out of the last eight years qualify for a tax credit of up to $6,500. The deadlines are the same as for first-time home buyers.
The income thresholds for existing homeowners are also the same as those for first-time home buyers. Likewise, existing homeowners can't claim the credit if they purchase a home for more than $800,000.
Your new home must be your principal residence. You can't use the credit to buy a vacation home. However, there's nothing in the legislation that requires you to sell your existing home to qualify. You could keep your first home as a vacation home or rental, although that property would no longer qualify for tax breaks associated with a primary residence.
In order to find out if you qualify, should we talk?