The $6,500 home buyer tax credit applies only to people who have previously owned AND LIVED in their homes for at least 5 consecutive years out of 8 and are planning to purchase a new home by or before April 30, 2010. For those who previously owned a home and purchased another one this year, the tax credit will not apply. It starts when the bill is signed, and it is not retroactive. The important thing is that your contract must be signed by April 30, 2010; you need to close on the transaction by June 30, 2010. So if you closed on a home prior to Nov 6^th, sorry, you’re not getting anything from the government except the standard IRS refund based on your mortgage payments and property taxes.

Most people are likely to claim the $8,000 or $6,500 dollar tax credit in their 2009 tax returns. But, an immediate refund is available to those who amend their 2008 tax returns. This time around, in order to avoid fraudulent refunds, the IRS will require those claiming the tax credit to attach proof of their new home purchase. Also, all purchasers must prove that they are over 18 years of age.  This is great news for our Ann Arbor Real Estate.

The new homebuyers tax credit also expands the income limits for buyers. The adjusted gross income limit for single taxpayers to receive full benefits has risen to $125,000 and to $225,000 for joint income tax payers.

The estimated cost of the extended tax credit bill is likely to be around $11 billion. However, according to the National Association of Realtors (see PDF comparison table), the tax credit has already added more than $22 billion to the nation’s economy and will result in more than 2 million home sales.

The tax credit applies to residences priced up $800,000. The majority of homes sold during the initial tax credit program were priced at under $300,000. Only 20% were priced between $300,000 and $400,000.  See home buyer tax credit video.

Since its inception in 2008, about 1.4 million people have filed for the home buyer tax credit. However, despite whatever economic stimulation may have resulted, legislators have indicated that this is likely to be the last time the tax credit will be extended.

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples:
· The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others
· If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit.)
· The credit applies even if you have co-signers on your mortgage loan

Here are some frequently asked questions on the changes to the Homebuyer Tax Credit

Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a first time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phase-out range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I
have found a home with a nonnegotiable
price of $825,000. Will I be able to use any
of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount
above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an
absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting
since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the
other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and
occupied it as his principal residence for 5 consecutive years out of the last 8 years. The
keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he
did since 3 years doesn’t impact eligibility.

Question: I am an eligible first time
homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
Answer: You do not have to close before December 1.  Now it is as if the Nov 30 date had never existed. Therefore, so long as the contract settles on or before June 30, 2010,  the purchaser will be eligible for the credit.

Home Buyer Tax Credit Extended and Expanded

	Current	New
Effective Date	· January 1, 2009	· December 1, 2009
Deadline	· Close on or before November 30, 2009	· Contract signed before May 1, 2010, must close before July 1, 2010 · Members of the uniformed services, foreign services, and intelligence employees who served an extended service of 90 days will have until April 30, 2011 and June 30, 2011.
Amount	· First-Timers: maximum of $8,000  or 10% of sales price · Prior Owners: $0	· First-Timers: Unchanged · Prior Owners: $6,500 if lived in prior home for at least 5 years of past 8 years
Income Limit	· Individual: $75,000 · Couple: $150,000	· Individual: $125,000 · Couple: $225,000
Other   Restrictions	· Home must be primary residence for at least 3 years. If home is sold or buyer moves before 3 years, must re-pay full amount of credit.	· Buyer must be at least 18 years old and not classified as a dependent for tax purposes · Home must cost less than $800,000 · New Home must be primary residence for at least 3 years following purchase. If home is sold or buyer moves, before 3 years, must re-pay full amount of credit. Exception for military, foreign services, or intelligence with extended 90 days service overseas.
How to claim	· If purchased in 2009, by amending 2009 tax return or claiming on 2010 tax return	· If purchased in 2010, by amending 2010 tax return or claiming on 2011 tax return

Link to previous Home Buyer Credit here.

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