Homebuyer Tax Credit Extended and Expanded

J0399043 Congress voted to extend and expand the federal homebuyer tax credit, and President Obama is expected to sign the bill today, effective immediately. It will be as if the November 30th deadline of the previous first time homebuyer tax credit had never existed. Transactions that close after the new bill is signed into law will be subject to the new rules, regardless of when the purchase agreement was signed.

Here are highlights of the extended and expanded home buyer tax credit, which will let more people qualify for the credit, including some who already own homes and those with higher incomes.

Congress made it perfectly clear that this is the last extension of the home buyer tax credit, stating it would not be extended when it expires next year.

FIRST-TIME HOMEBUYERS

  • $8,000 tax credit ($4,000 per person if married and filing separately)
  • Buyer may not have owned a principal residence for 3 years prior to closing date (both parties of a married couple must qualify)
  • Purchase agreement must be in effect by April 30, 2010 and must close by July 1, 2010
  • Income limits increased to $125,000 for a single person and to $225,000 for a married couple
  • Home purchased cannot be priced higher than $800,000 (any amount over $800,000 makes the purchase ineligible for any portion of the credit)

CURRENT HOMEOWNERS

  • $6,500 tax credit ($3,250 per person if married and filing separately)
  • Buyer must have used the home sold or being sold as a principal residence for 5 consecutive years in the previous 8 (for example, it means that if you owned home for at least 5 years, then sold it 1-2 years ago and have been renting you would qualify)
  • Purchase agreement must be in effect by April 30, 2010 and must close by July 1, 2010
  • Income limits increased to $125,000 for a single person and to $225,000 for a married couple
  • Home purchased cannot be priced higher than $800,000 (any amount over $800,000 makes the purchase ineligible for any portion of the credit)
  • Home purchased does not have to cost more than the home sold (can be any price $800,000 or lower)

ADDITIONAL INFO – changes with new bill

  • Gives authority to the IRS to do greater oversight while processing the return
  • Requires the taxpayer claiming the credit to be 18 years or older
  • Members of the military, military intelligence and foreign service who are on qualified extended official duty are not subject to the recapture fee and individuals who have been deployed overseas for 90 days or more in 2008 or 2009 can claim the credit through April 30, 2011

ADDITIONAL INFO – extended from previous bill

  • The tax credit does not apply to a vacation home or investment property, it must be a primary residence located in the US
  • You claim the credit when filing your tax return 
  • If you cannot use any or all of the tax credit you will get a refund for the unused portion
  • If home is sold within 3 years, the entire amount of the credit will be recaptured at time of sale
  • Cannot buy from a close relative…includes spouse, parent, grandparent, child or grandchild
  • CAN purchase from a step-relative
  • If a parent who will not live in the property co-signs for a mortgage the child will be eligible for the tax credit provided other requirements are met
  • Tax credit amounts indicated above are the maximum, based on 10% of purchase price; since most home purchases are over $80,000, most buyers who meet the rest of the criteria would qualify for the maximum amount

NOTE: Above information is deemed accurate to the best of my knowledge, but not guaranteed. As of the time of this writing it is not yet signed into law but is expected to become effective as soon as President Obama signs the bill, as early as today.

Sharlene Hensrud, RE/MAX Results - EmailHomesMSP.com

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I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.
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