The $8,000 tax credit scheduled to expire November 30, 2009 has been extended. Now a purchase agreement can be entered into up to May 1, 2010, as long as the transaction closes no later than July 1, 2010. It continues to cover first time home buyers, but has also been extended to include certain existing home owners. So now an expanded group of home buyers are eligible for this fanatically popular tax credit.
The tax credit remains at $8,000 for home buyers that haven’t owned a primary residence in the last three years. But now home owners that have lived in their current primary residence for at least five consecutive years out of the past eight years qualify for a $6,500 tax credit. Under the old rules, existing home owners did not qualify.
Here is an example of how the credit works. If you own a home that you have lived in for the past five years, if you decide to buy a new primary residence today, you would qualify for the $6,500 tax credit, based on the fact that you have lived in the same residence as your primary home for at least five consecutive years out of the past eight.
Another crucial change to the credit rule is that the income qualifications of eligible buyers have been increased. The old rule limited the income of a buyer to $75,000, and for married tax payers, $150,000. Now individuals who make up to $125,000, and $225,000 for joint filers, are eligible to receive the applicable credit amount. This is very important in higher income/cost areas, because in those places most first-time buyers wouldn’t qualify for the credit because of their income without the income bump.
There is a limitation on the amount of the purchase price of the new home. The tax credit applies to homes purchased for less than $800,000. This amount should be more than adequate for buyers to get their first or a good “move up” home in the metropolitan Phoenix-Mesa-Scottsdale area.
The credit can even apply to the purchase of a multi-family property. As long as the owner will live in one of the up to four units as a primary residence, the other units could be rented out to provide income!
Of course there is fine print applicable to the eligibility rules. Having a cosigner on your mortgage loan doesn’t exclude you from claiming the credit. But if a married couple, both spouses must qualify (based on their income or past home ownership status) to receive the credit. But if two unmarried individuals buy a home, and only one of the individuals qualifies for the credit, the individual who qualifies for the credit can claim the full credit.
Because of the exclusions and quirks in the law, it is critical that you speak with an accountant or tax professional to get the specifics and to ascertain if you will in fact qualify for the credit. Just receiving the credit can impact other income and tax issues, so proper advice is a must. If you don’t have a tax advisor, we can provide you with the names of people we trust. Whomever you choose to help you with your IRS issues, we will work with them so you can obtain the full amount of credit you are entitled to. Call or contact us at www.simplysoldaz.com to find your new or resale home before the tax credit is gone for good.