It’s official! As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:
- Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
- Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
Here is a summary of the new tax credit rules:
| EXTENSION OF FIRST-TIME BUYER CREDIT |
| |
Jan. 1 – Nov. 30, 2009
Rules as enacted Feb. 2009 |
Nov. 7 – Apr. 30, 2010
Rules as enacted Nov. 2009 |
First-time Buyer
Amount of Credit |
$8000
($4000 married filing separate) |
$8000
($4000 married filing separate) |
First-time Buyer
Definition for Eligibility |
May not have had an interest in a principal residence for 3 years prior to purchase |
Same |
EXPANSION TO CURRENT HOMEOWNERS |
| |
Jan. 1 – Nov. 30, 2009
Rules as enacted Feb. 2009 |
Nov. 7 – Apr. 30, 2010
Rules as enacted Nov. 2009 |
| Current Homeowner Amount of Credit |
No Provision |
$6500
($3250 married filing separate) |
Effective Date
Current Owner |
No Provision |
November 7, 2009 |
Current Homeowner
Definition for Eligibility |
No Provision |
Must have used home as a principal residence consecutively for 5 of the previous 8 years |
|
| Termination of Credit |
Purchases after November 30, 2009.
(Becomes April 30, 2010 on Date of Enactment.) |
Purchases after April 30, 2010 |
| Income Limits |
$75,000 – single
$150,000 – married
Additional $20,000 phase-out |
$125,000 – single
$225,000 – married
Additional $20,000 phase-out |
NEW RULES
The revised tax credit has several rules that were not outlined in the previous legislation:
- Binding Contract Rule. So long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
- Limitation on Cost of Purchased Home. Effective November 7, 2009, there is an $800,000 limit on the home cost.
- Purchase by a Dependent. As of November 7, 2009, this is explicitly ineligible for the credit.
- Anti-Fraud Rule. Purchasers must now attach documentation of the purchase to their tax returns.
Remember: If the property is sold within three years from the date of purchase, the buyer must pay back the full amount of the credit. This is not a new rule, just a reminder.
Source: NAR Issue Brief – Homebuyer Tax Credit
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