(Thanks to my friend Donna Harris with RE/MAX Austin Skyline over in Austin, Texas for this GREAT explanation of the tax credit extension!)
The $8000 First Time Home Buyer Tax Credit has been extended, expanded, and modified. It is no longer just for First Time Home Buyers, but it’s also for Move-up Home Buyers.
There are many rules you need to know in order to comply with this credit, and yes, it truly is a credit as long as you’re in the house for a minimum of three years. If you sell prior to three years, you will have to pay it back.
First Time Home Buyer means someone who has not owned a primary residence in the last three years. This means you could own an investment property and still qualify, but not a homesteaded property. If you are married and your spouse has owned a primary residence, but you have not owned one, you do not qualify for the tax credit. However, something new is that if you have a parent who has owned property and they co-sign for you, you could still qualify.
This tax credit is mostly referred to as the $8000 First Time Home Buyer Tax Credit, however, not everyone gets $8000. The number is the maximum number you are allotted for the tax credit and it’s based on 10% of the purchase price, not to exceed $8000. In plain English, that means if the house you purchase is $80,000 or more, you will get the $8000. If you buy a $73,000 property, you would only qualify for $7300. Make sense?
Move-Up Home Buyers are a new category for this tax credit, and there are more rules. You must have owned a primary residence for five consecutive years out of the last eight years. That means, if you have owned a property that is currently being used as a rental, but you lived in it for five consecutive years prior to renting it within the last eight, you qualify. If you bought an investment property that you rented out a few years ago, but now currently have lived in it for five years, you qualify. Simple enough…
The Tax Credit for the Move-Up Home Buyer is limited to $6500 and not $8000. Same rules apply where it’s 10% of the sales price, not to exceed $6500.
The income requirements have changed as well, and the limits are the same whether a First Time Home Buyer or a Move-Up Home Buyer. Single tax filers can receive the entire tax credit up to $125,000 whereas they can receive a partial credit from $125,001 to $145,000. Joint tax filers can receive the entire tax credit up to $225,000 whereas they can receive a partial credit from $225,001 to $245,000. Above these income limits, home buyers are not eligible for anything.
There has also been a purchase price cap added to this new law which was not part of the previous one. The cap is $800,000. That’s a lot of house, but if you can afford that much house, you probably have bigger things to worry about than this small tax credit.
Of course there is a deadline for everything, and this new law actually has two deadlines you need to pay attention to. The first one is that you must be under contract with a property by April 30, 2010. The second deadline is that the property must close and fund prior to June 30, 2010. That way, no one can wait until the last minute to purchase homes and then hope they close on time. There is a two month buffer, but that actually means you only have less than six months to find a property and get an executed contract!!
The above does not cover every single rule in this new law, but the above takes care of 99% of the cases. There is a rule that you cannot buy a house from a blood relative and receive the tax credit, but you can buy a house from a step-relative and still receive the credit… and others that are very rare circumstances.
Email or call me today for further questions, and let’s get you into a new house before six months come and go! The time will move faster than you think! And if you have a house to sell to be one of the Move-Up Home Buyers, we need to get that house on the market ASAP!
If you would like to buy or sell a home in Fort Wayne Indiana or in the surrounding communities, please call us at 260-704-0842, or you may want to visit our website for more specific information on the communities we service: Fort Wayne Real Estate, Huntington Real Estate, Columbia City, Bluffton, Roanoke, Warsaw and Winona Lake, Auburn, New Haven and North Manchester, IN.
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Fort Wayne Realtors Jared and Amanda Christiansen
The Christiansen Team
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