Tuesday, December 22, 2009
By now, most people are aware that the government has approved an extension of the homebuyer tax credit. In addition to the $8,000 tax credit for first time home buyers, the program now provides a $6,500 tax stimulus for existing homeowners who purchase a new home between November 6, 2009 and April 30, 2010.
For first-time homebuyer, the rules are:
- Homeowners must have lived in their previous residence for 5 consecutive years out of the last 8.
- They must live in their new residence for at least 3 years.
- The price of the house cannot be above $800,000.
- The credit provides for 10% of the home’s price (up to $8,000).
- The buyer’s income must be below $125,000 (for individuals), or $225,000 for couples. (They can still receive a lesser credit amount if their income is up to $20,000 more than this.)
- Home purchases may not be from a relative.
Many people are not focusing on the benefits of the addition to the first time home buyer tax credit for the move up or move down buyer. Specifically:
- The homebuyer does not have to sell their previous home in order to qualify for the $6,500 homebuyer credit. This is huge! In other words, as long as they fulfill the other requirements, they can buy a new home, receive the tax credit, and rent out their previous home. In order to qualify for the credit, the homebuyer must stay in the new home for a minimum of three years.
- The purchased home does not have to be more expensive than the previous one to qualify. This makes the program appealing for both move-up and move-down buyers—a savvy investment option either way.
- The credit also applies to a new home the owner builds. Since there is no closing date for homes like this, the house is considered to be “purchased” on the first day the owner occupies it.
The $6,500 credit is an awesome addition to the program because home owners can actually take advantage of the credit regardless of whether they actually sell their home. Despite the fact that the real estate market is getting better, we are still experiencing a buyer’s market and some sellers are still having trouble selling their homes. It is an incredible opportunity to be able to take advantage of the $6,500 credit even if their house does not sell.
Buyers wanting to take advantage of these programs need to be under contract no later than April 30th and closed by June, 2010. These are tremendous opportunities for home ownership. I could not recommend it more highly to take advantage of these programs while they last.