LRG Boston Real Estate Blog

Written By: Laura Levin of Luxury Residential Group

With a Senate vote of 98-0, followed by House approval shortly thereafter, the popular first time home buyer tax credit has been extended and expanded. (Insert Applause)

$8,000 - Home Buyer Credit

Even if you are not preparing to buy or sell a home in the near future, the credit may have a great influence on your finances. Below is a breakdown of the new legislation and how to make it work in your favor!

Who Is Eligible?

There are actually two credits:

First-time home buyers with adjusted gross incomes up to $125,000 (singles) or $225,000 (married) may receive the complete $8,000 tax credit as long as they purchase a primary residence before June 30, 2010 and haven’t owned a home in the past three years. If your income is above those levels the credit lessens. It is not allowed once income reaches $145,000 for singles or $275,000 for married couples.

Current homeowners may obtain a credit of up to $6,500 if they’ve lived in their primary residence for five consecutive years out of the past eight, meet the same income criterion as first-time buyers, and buy a primary residence before June 30, 2010.

Who Is Not Eligible?

Besides those buyers who top out the income restrictions, there are some other buyers who do not qualify.

Luxury Market: We are sorry to say that you are not permitted to use the new tax credit to buy a property that
costs $800,000 or more.

Vacation Or Investment Residences: You are not permitted to claim the credit to purchase a second residence, vacation home, or investment property.

Additionally significant is that you are not permitted to take the credit if you have obtained the home as a gift or
inheritance or from your spouse, parents, grandparents, children, or grandchildren.

What Are The New Terms Of The Credit?

The original credit was due to expire November 30, 2009. This new bill extends the deadline an additional seven months. Although the credit officially terminates on April 30, 2010, you will still qualify as long as you have a binding contract by that date and close by June 30.  Members of the U.S. armed forces, military intelligence, or foreign service on qualified extended duty also receive an extra year to take either credit. Moreover, if you or your spouse has been deployed overseas for 90 days or more in 2008 or 2009, you have until April 30, 2011 to claim the tax credit.

Receiving the Credit

Provided that you purchase a home in 2010 before the program expires, you are eligible to claim the tax break on your 2009 federal tax return.

Be Mindful!

The feds do not intend for this to facilitate house flippers. If you sell the home or move to an alternate primary residence within three years of closing, you can expect that you will be forced to repay the tax credit.

Guidance For Home Buyers

If you are married and have not ever owned a home, but your spouse has owned one within the past three years, the two of you do not qualify for the $8,000 first-time home-buyer credit. You do qualify for the $6,500 credit for current homeowners, as long as each of you meet the other prerequisites.

Even if you already own a primary residence, the credit is available to you if you want to buy a house with your child. Your child will get the credit of up to $8,000 assuming he or she meets the other requirements – and even if you own half the property.

How To Benefit If You’re Not In The Market?

Sellers: As long as your house is priced below $800,000 you should be sure to remind both first-time and trade-up buyers that your home may help them qualify for the credit.

Homeowners: If the new tax credit works as well as is anticipated, it could facilitate the sales of hundreds of thousands of homes, accounting for the surplus in inventory. This is precisely what you want to happen because your home value can’t and won’t begin to increase until the other homes in your neighborhood are sold.

Nearly 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have bought their homes without the credit.

This entry was posted on Monday, November 9th, 2009 at 9:45 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.