Home buyer tax credit [extension and expansion]
Congress has voted on and the President has signed an extension and expansion of the home buyer tax credit.
The tax credit is effective immediately and the terms override the terms of the first time home buyer tax credit which was due to expire on November 30, 2009.
The details:
An $8,000 tax credit up to 10% of the value of the home is available to first time home buyers. Neither the purchaser nor the purchaser's spouse may have owned a principal residence in the 3 years prior to purchase in order to meet the definition of first time home buyer.
A $6,500 credit up to 10% of the value of the home is available to home buyers who have owned and lived in a home for 5 consecutive years of the last 8 years. It does not have to be the most recent 5 consecutive years but must be 5 consecutive years out of the last 8 years.
Any type of single family residence including condos, co-ops and townhouses that will be used as a primary residence qualify.
The tax credit will reduce or eliminate income tax liability for the year of the purchase. Any unused amount of tax credit will be refunded to the home buyer.
Full amount of the tax credit is available for individuals with an adjusted gross income of no more than $125,000 or couples with a joint adjusted gross income of no more than $225,000. The credit will phase out to lower amounts for individuals and couples with higher incomes.
The credit is only available for the purchase of principal residences with a purchase price of $800,000 or less.
It the home is sold within 3 years from the original purchase, the entire amount of the tax credit is recaptured upon sale. The recapture provision is waived for military personnel relocating due to orders.
The tax credit is extended for one year after expiration date for any military personnel that are serving outside of the United States for at least 90 days in either 2009 or 2010.
The purchaser must be at least 18 years of age or married to a person 18 years or older and the settlement statement must be attached to the tax return.
The effective date is immediately upon enactment (signing by President Obama) and the contract must be ratified on or before April 30, 2010 and the sale must close by June 30, 2010.
Some additional good news:
If you are either a first time home buyer who could not close by the previous deadline or whose income was higher than the previously allowed limit, you are now eligible for the tax credit based on the terms of the extended tax credit. If you are a qualifying existing home owner and you are already under contract to buy a home that closes after enactment, you will also qualify for the tax credit.
Disclaimer: I am not an attorney or accountant so please consult with your trusted financial advisers including your attorney and accountant for questions specific to your personal situation.
I can however happily help you with all of your Charleston area real estate needs, whether you are considering buying or selling.
And while the home buyer tax credit is an attractive benefit to consider when buying a home, it should not be your primary consideration.