I couldn't have said it better, so why try? After reviewing a couple dozen blog posts, this seemed to be written the best, so I'm sharing it with you.
The $8000 Homebuyer Tax Credit has been officially extended and expanded to include a new $6500 tax credit for move-up buyers. Dallas area first time homebuyers and move-up buyers now have until April 30, 2010 to obtain a written, binding contract and until June 30, 2010 to close the transaction.
Some of the details and guidelines for the homebuyer tax credit were changed slightly with passage of this new legislation. Some of the guidelines were loosened while others were tightened. And there is a sepearate set of guidelines for the new $6500 tax credit for repeat buyers as well.
EXTENSION OF THE $8000 FIRST TIME HOMEBUYER TAX CREDIT
The new legislation extends most of the guidelines of the previous $8000 first time homebuyer tax credit with the exception of the deadline extension, increased income limits and a few other details:
Guidelines that REMAINED THE SAME:
- Amount of tax credit remains the lesser of $8000 or 10% of the purchase price.
- Home must be primary residence that will be occupied by the owner. Investors do not qualify.
- The tax credit does not have to be repaid unless the homeowner sells the home in the first three years.
Guidelines that worked out BETTER for homebuyers:
- Deadline to obtain a WRITTEN AND FULLY EXECUTED CONTRACT is now April 30, 2010 and the transaction must CLOSE ON OR BEFORE JUNE 30, 2010. The previous program had no specific date to obtain a fully executed contract, but the deadline to close the transaction would have been November 30, 2009.
- MILITARY SERVICEMEMBERS who were on active duty overseas for a period greater than 90 days in 2008 or 2009 will be allowed until April 30, 2011 to claim the first time homebuyer tax credit.
- Income limits for single taxpayers raised from $75,000 to $125,000. The program phases out completely at $145,000.
- Income limits for married couples raised from $150,000 to $225,000. The program phases out completely at $245,000.
Guidelines that became MORE STRICT for homebuyers:
- Maximum purchase price cap is now $800,000. Previous program had no price cap.
- Requires written proof of home purchase in the form of a certified HUD-1 closing statement. Also, the IRS has more authority to conduct oversight on claims for the tax credit. The previous program was plagued with fraud since it did not require homebuyer to show any proof of purchase.
CREATION OF THE $6500 TAX CREDIT FOR MOVE-UP HOMEBUYERS
This is a completely new program that was passed as part of the legislation that expanded the first time homebuyer tax credit. Current homeowners who are "moving up" will quaify for the $6500 tax credit beginning with all purchases that close after November 6, 2009 and who meet the other guidelines listed below. Many of the guidelines and deadlines are the same or close to the same as those of the first time homebuyer tax credit:
General guidelines (beginning after November 6, 2009):
- Amount of tax credit is the lesser of $6500 or 10% of the purchase price of a new home.
- Homebuyer must have owned and lived in their previous home for at least five consecutive years out of the last eight years.
- Home purchased must be a primary residence that will be occupied by the homebuyer. Investors do not qualify.
- Maximum purchase price is $800,000.
- Tax credit does not have to be repaid unless the owner sells the new home in the first three years.
- Income limits are the same as for the $8000 first time homebuyer tax credit ($125,000 for single filers and $225,000 for married couples, phases out completely at $145,000 and $245,000 respectively).
- A written, binding contract must be signed on or before May 1, 2010 and the transaction must close on or before July 1, 2010. This is ONE DAY LATER than the deadline for the first time homebuyer tax credit for some reason, perhaps because simultaneous closings can often take two days to fully consummate.
- IRS will require proof of purchase for the new home and will likely require proof that the previous home was both owned and occupied by the homebuyer.
Stay tuned for some additional updates and some frequently asked questions. If you have any questions about the extension and expansion of the homebuyer tax credit, please email me.
Opinions expressed here are the sole responsibility of the author, and do not necessarily reflect the view of Fairway Independent Mortgage.
Ruth Vogt, Sales Manager
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