Updates on Federal Tax Credit Extension, Part II
Thursday, November 12th, 2009
A little further clarification on the Federal Tax Credit for the purchase of a home:
For First Time Home Buyers
Maximum price for the purchased home is $800,000.
New home must be the principle residence of the buyer(s) for the next three consecutive years.
Income limitations $125,000 for full credit by a single buyer, (up to $145,000 for partial credit), $225,000 for a married couples for full credit, (up to $245,000 for partial credit).
First Time Buyer must be at least 18 years of age, may not be a dependent on someone else’s tax return and may not have owned a home in the past three (3) years.
The purchase may not be of a home from a direct lineal ancestor or descendant.
The Tax Credit is based upon 10% of the purchase value, up to a maximum of $8,000.
The Tax Credit is fully refundable, meaning if you owe less than $8,000 in tax liability, the IRS will send you the difference.
The new limitations (for income, qualification of the buyer and source of the purchased home) all became effective on November 6, 2009 and will remain in effect until a purchase contract is signed, no later April 30, 2010, and the home closure, no later than June 30, 2010.
There are special rules for members of the armed forces who have been stationed outside the United States for at least 90 days. Please consult you professional tax adviser for how these rules may impact your decision to purchase if you are a member of the armed forces.
For homes purchased prior to November 6, 2009, the rules of the original First Time Home Buyer Tax Credit still apply.
For the Move-up Home Buyer
All of the above qualifications and restrictions apply, except the Tax Credit is limited to $6,500, the Buyer must have established a permanent residence in another owned home for at least 5 of the previous 8 years and the final point regarding the “original” legislation does not apply . There was no Move-up Home Buyer Tax Credit in the original legislation, so to be eligible to apply for this Tax Credit is limited to homes purchased after November 6, 2009, the effective date of this legislation, signed a contract before April 30, 2010 and closed escrow by June 30, 2010.
As with all tax related decisions, I recommend you discuss them with your professional tax adviser, because your individual circumstances may create other opportunities or alternatives.
For additional information please refer to the following websites:
National Association of Realtors
Thanks for the information Steve – it’s good to hear that this credit is available to more buyers. Have you guys noticed any more action from move-up buyers?
Jayson,
It is too early to tell if the “Move-up” Tax Credit has been understood by home buyers yet. We are educating buyers as they come through our models. I assume other builders are doing the same. I look for a 1Q10 turn up in sales as the tax credit again approaches it’s time limits. Holidays and seasonality in sales will keep the reaction fairly mild through the remainder of the year.
Steve
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