Nov. 11, 2009

Homebuyer tax credit expanded

On Friday, Nov. 6, 2009, President Obama signed a bill that extends and expands the homebuyer tax credit. This year’s version includes the same $8,000 tax credit, but has also undergone changes that make the program available to a significantly larger pool of people.

The basics

First-time homebuyers may qualify for a tax credit on their tax return of 10% of the purchase price of a home. The maximum benefit is $8,000, which means that any home above $80,000 qualifies the buyer for the full amount of the credit. The purchase price cannot exceed $800,000.

This is a true credit, meaning if you have a $3,000 tax burden and qualify for the full amount allowed under the program, you’ll actually get $5,000 back.

More time to act

The program has been extended from the original deadline (November 30, 2009) to the new deadline – April 30, 2010. A signed contract must be in place by that date.

The actual closing date can be as late as June 30, 2010.

More people qualify

The two most notable changes are a substantial increase in the qualifying income limits and the inclusion of a credit for current homeowners who purchase a home.

The income limits have been stretched from $75,000/year (single) and $150,000 (married) to $125,000 and $225,000 – this means many more thousands of Texans are eligible for the credit.

What’s more, unlike the previous program, the redesigned tax credit is not just for first-time buyers. Eligible current homeowners may claim up to a $6,500 credit for qualifying properties.

To take advantage of the credit, homeowners must meet certain criteria, which can be a little confusing. Let me provide some clarification:

If you have owned and lived in a home for at least five consecutive years of the last eight years and meet income requirements, you likely qualify for the credit.

Here’s something interesting … you don’t have to sell your existing home to take advantage of the credit. The home you purchase must become your principal residence, so you would have to move there. But you may be in a position to keep your original house as a second home or rental property.

Paybacks

As long as you live in the newly purchased home for three years before selling it, the credit does not have to be repaid. A notable exception is members of our military, who do not have to repay the credit if they must sell the home or stop using it as a residence because of extended duty.

In addition, service personnel outside of the U.S. during any part of 2009 or early 2010 get an additional year to claim the credit. In other words, in most cases, the program ends on April 30, 2010, but active-duty service members working overseas have until April 30, 2011 to have a signed contract.

Get your ducks in a row

If you’re ready to buy your first house, or have been considering a move-up, the time is right. You have a little time, but talk to a Texas Realtor soon … April 30 will be here before you know it.

For more information about real estate in the Lone Star State, including a free poddetailing the expanded credit, visit TexasRealEstate.com