Homeowners Tax Credit Extended and Expanded
Homeowners Tax Credit Extrended and Expanded
The (Not Just) First-Time Homebuyer Tax Credit, Expanded & Explained
After much speculation by the general populace (and the real estate industry) and much consternation by Congress, the much-anticipated extension of the First-Time Homebuyer Tax Credit has been passed.
Passed, not to mention greatly expanded.
The original tax credit, which was a part of the economic stimulus package put into effect in February 2009, was made available to first-time homebuyers (people who hadn't owned a home for three or more years) and applied to home purchases that closed on or before November 30, 2009. With the passage of the expansion bill into law, that credit has been extended to purchases made by May 1, 2010 and that are closed prior to July 1, 2010.
For first-time homebuyers, the credit amount, as it was in the original plan, remains at 10% of the purchase price, up to a maximum credit of $8,000. Originally, to be eligible for the credit, single (not married) purchasers could have an adjusted gross income (AGI) of no more than $75,000/year; married couples with an AGI of $150,000 or less were eligible. Under the new plan, singles with an AGI of up to $125,000 and married couples with an AGI of up to $225,000 are eligible.
For many of the homeowners who had previously been ineligible to claim the credit at all because they already owned a home, there is good news for them. Under the new plan, homeowners who have lived in their homes for 5 consecutive years of the past 8 years are eligible to receive a credit toward a new home purchase. Meant to give a boost to "move-up" buyers, this credit amount can be 10% of the purchase price, up to $6,500. The income caps referenced above are the same.
The members of the Armed Services and who were/will be deployed outside the United States for at least 90 days between December 31, 2008 - May 1, 2010, may claim the credit until May 1, 2011 (with settlement all wrapped up before July 1, 2011).
One peculiarity of which it's important to take note: even if one purchases a new home in 2010, they can claim the credit on their 2009 tax return. If they file for an extension of time to file their income taxes, or if they amend their already-filed 2009 tax return, they may include the tax credit (this would put the cash in their pocket much sooner than if they were to claim the credit on their 2010 tax return). Be sure, however, to take heed of the income limitations, as they apply to the year in which they claim the credit.
Finally, it's important that you understand that if the purchase price of the home exceeds $800,000, no tax credit may be claimed, regardless of the income levels. The credit only applies to primary residences. Investment properties or vacation homes don't qualify.