I am glad the government did not wait less than 24 hours of the November 30th deadline to let us know if they were either going to extend the tax credit or not. Not only did they extend the $8,000 Tax Credit for First-Time Homebuyers, they added a $6,500 Tax Credit to “Repeat”, “Move-Up”, or “Step-Up” homebuyers. They also increased the income limits as well as the home purchasing limits.
What does this mean? Buyers start buying! Interest rates are still low! Here in the Austin, Texas Metropolitan Area there are plenty of home to choose from. There are currently over 9,000 homes for sale.
My good friend and colleague, Richard Moore from Land Mortgage, emailed me the skinny on the changes of the $8,000 Tax Credit and the new $6,500 Tax Credit that I am sharing with you below:
The last official hurdle with the Homebuyer Tax Credit extension was crossed this morning when President Barack Obama signed the bill that was overwhelmingly passed by the House of Representatives and Senate yesterday.
The current measure extends and expands the scope of the homebuyer tax credit. Included in the expanded portion is a program for Current Homeowners. This new $6,500 tax credit is designed for current homeowners interested in buying a new primary residence. Eligible current homeowners must document that their sold home or home being sold was used as a principal residence consecutively for 5 of the last 8 years. The modifications to the original measure become effective December 1st. A summary of the changes follows:
First-Time Homebuyer Tax Credit Details/Changes ($8,000)
- To qualify the purchaser must not have owned a home in the last 3 years. Purchaser must owner-occupy the home.
- The tax credit is equal to 10% of the purchase price of the home, not to exceed $8,000.
- Qualifying maximum income limits effective on December 1st, 2009:
$125,000 Adjusted Gross Income for Individuals
$225,000 Adjusted Gross Income for Married Couple
- This is an increase from $75,000 and $150,000 respectively from the previous version of the tax credit
- If a taxpayer owes less than the tax credit, the government will send a check for the difference. If the taxpayer is due a refund, the reimbursement will be the refund due + the tax credit.
- Recapture provision: The tax credit is not required to be repaid unless the home is sold within the first three years of ownership.
- Binding Contract Provision: To qualify for the tax credit, the purchaser must have a binding contract effective on or before April 30, 2010 with the closing happening before July 1st, 2010.
New - Limitation on Cost of Purchased Home – The price of the home cannot exceed $800,000.
New – Purchase by a Dependent – The home cannot be purchased by a dependent. This rules the transaction ineligible.
New - Anti Fraud Rule – The purchaser must attach documentation of purchase to tax return.
- The purchaser is eligible to claim the credit on their 2009 or 2010 tax return. They should discuss the details of how to file for the credit with their CPA.
Move-Up, Repeat, Step-Up, Current Homebuyer Tax Credit ($6,500)
- This program becomes effective December 1st, 2009.To qualify the purchaser must document that their sold home or home being sold was used as a principal residence consecutively for 5 of the last 8 years. Purchaser must owner-occupy the home.
- The tax credit is equal to 10% of the purchase price of the home, not to exceed $6,500.
- Qualifying maximum income limits as of December 1st:
$125,000 Adjusted Gross Income for Individuals
$225,000 Adjusted Gross Income for Married Couples
- If a taxpayer owes less than the tax credit, the government will send a check for the difference. If the taxpayer is due a refund, the reimbursement will be the refund due + the tax credit.
- Recapture provision: The tax credit is not required to be repaid unless the home is sold within the first three years of ownership.
- Binding Contract Provision: To qualify for the tax credit, the purchaser must have a binding contract effective on or before April 30, 2010 with the closing happening before July 1st, 2010.
- Limitation on Cost of Purchased Home – The price of the home cannot exceed $800,000.
- Purchase by a Dependent – The home cannot be purchased by a dependent. This rules the transaction ineligible.
- Anti Fraud Rule – The purchaser must attach documentation of purchase to tax return.
- The purchaser is eligible to claim the credit on their 2009 or 2010 tax return. They should discuss the details of how to file for the credit with their CPA.
For more details about the tax credits contact a mortgage lender, mortgage broker, Realtor, CPA, to name a few. Really, don’t miss the boat on this if you can take advantage of the government giving you money. See if you can get approved right now. You maybe surprised as I know some of my friend and family have been surprised.
If you get approved, start shopping! – Hint: Remember, just because you get approved for $500,000 does not mean to buy a $500,000 home. First ask yourself what monthly mortgage payments can you afford that includes Principal, Interest, Taxes, Insurance, and often times Mortgage Insurance (Private Mortgage Insurance).
Take action now! Good luck!
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