Tax Credit for Home Buyers is Extended and Expanded…

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Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

Tax Credit for Home Buyers is Extended and Expanded…

We interrupt our regularly scheduled programming… I had planned on discussing additional credit score topics as a continuation of last week’s column … However, this bit of hot news must come first!

President Obama just signed the Homebuyer Tax Credit Extension, making the $8,000 tax credit available through April 30, 2010. As part of an economic stimulus package, the tax credit that’s been available this year to first-time homebuyers will be extended, but a new addition to the package is now being offered to current homeowners. For those who have lived in their home for 5 or more years, a $6,500 tax credit is now available. Income limits have been raised as well, from $75,000 for a single homeowner to $125,000 and $125,000 for a couple to $225,000.Wednesday evening, the Senate passed this bill unanimously and Thursday evening, the House of Representatives voted 403 to 12 in favor of the stimulus plan.

The following details apply to the homebuyer tax credit expansion:

Who is Eligible

· First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.

· Existing home owners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.

· All U.S. citizens who file taxes are eligible to participate in the program.

Income Limits

Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.

For married couples filing a joint return, the combined income limit is $225,000.

Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.

The credit is not available for single taxpayers whose MAGI (Modified Adjusted Gross Income) is greater than $145,000 and married couples with a MAGI that exceeds $245,000.

Effective Dates

The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.

Types of Homes that Qualify

All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence.

Vacation home and rental property purchases do NOT qualify.

Tax Credit is Refundable

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