Homebuyers Tax Credit Expanded & Extended!

Cindy Small, CMPS, of Union Mortgage just sent us this update on the tax bill. Thank you Cindy! Please feel free to contact us sue@suegoodhart.com or contact Cindy csmall@union-mtg.com with any questions!


President Obama has just announced that he has signed the tax bill into law. Below is a little more information about the program and it is supposed to take effect on December 1, 2009. I will keep you posted as to more specifics but here is a quick overview of the changes…



Although the tax credit remains at $8,000 for home buyers that have not owned a primary residence in the last three years, it has been expanded to include a $6,500 tax credit for home buyers that have lived in their current primary residence for at least five consecutive years out of the past eight years. Under the old rules, move-up home buyers did not qualify.



Consider these three examples:

Example 1:
Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2:
Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.

Example 3:
Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight.

The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010. It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit.

The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. This means that more people will qualify for the credit – especially in parts of the country with higher costs of living such as ours.

Here is an addition regarding the change for our military folks…

There has also been an additional extension for members of our Armed Services that will be deployed or working on official business outside the U.S for at least 90 days during the period from Jan. 1, 2009 through May 1st, 2010. These purchasers will have until May 1, 2011 to ratify a contract and they must settle before July 1st, 2011. They are given an additional year to take advantage of this tax credit. Once again we want to thank them all for their service to our country!

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