I have received a lot of questions about how the tax credit works for existing home owners. While I don't have answers to all the questions, please consult the chart below for more clarification. I believe this should answer most of your questions. The information below comes from the National Association of REALTORS® Government Affairs Division. To date, this is the information that has been released.
| FEATURE | Jan 1 – November 30, 2009 Rules as enacted February 2009 |
November 7 – April 30, 2010 Rules as enacted November 2009 |
| First-time Buyer Amount of Credit |
$8000 ($4000 married filing separate) |
$8000 ($4000 married filing separate) |
| First-time Buyer Definition for Eligibility |
May not have had an interest in a principal residence for 3 years prior to purchase |
Same |
| Current Homeowner Amount of Credit |
No Provision | $6500 ($3250 married filing separate) |
| Effective Date Current Owner |
No Provision | November 7, 2009 |
| Current Homeowner Definition for Eligibility |
No Provision | Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years |
| Termination of Credit | Purchases after November 30, 2009. (Becomes April 30, 2010 on Date of Enactment.) |
Purchases after April 30, 2010 |
| Binding Contract Rule | None | So long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close. |
| Income Limits (Note: Increased income limits are effective as of date of enactment of bill) |
$75,000 – single $150,000 – married Additional $20,000 phase out |
$125,000 – single $225,000 – married Additional $20,000 phase out |
| Limitation on Cost of Purchased Home |
None | $800,000 November 7, 2009 |
| Purchase by a Dependent | No Provision | Ineligible November 7, 2009 |
| Anti-fraud Rule | None | Purchaser must attach documentation of purchase to tax return |
A couple of questions I received a lot of that are not specifically addressed above include:
Question: Can I keep my current house as a rental and still qualify for a new purchase tax credit?
Answer: You must sell your current home
Question: Does $6500 apply to any home purchase, regardless of price?
Answer: If the home price is between $65,000 - $800,000, you will be eligible for $6500. If under $65,000 the amount will be reduced to 10% of purchase price.
Question: If I was an existing home owner who purchased a home earlier this year, will I qualify for the tax credit for existing home owners?
Answer: There was no "grandfather provision" in this bill. It applies to purchases going forward, but if you already closed on a home purchase, you do not qualify for the tax credit.
I hope the above chart will answer most of your questions. As you can see, because of the extensive fraud that accompanied the original first time home buyer tax credit, there is an anti-fraud provision with this bill.
Please feel free to keep the questions coming, and I'll do my best to dig up answers for you.
Please refer to the update on this information: More updates on the home owner tax credit
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Comments
Does $6500 apply only if you're selling a house, not just the fact that you've lived in your house for 5 years and do not sell?
Debbie
At this point, it looks like that's how the rules read, but the final determinations on any questions will be made by the IRS after they review the new law. I'm sure we'll see an update from the IRS at some point in the near future.
"So long as a written binding
contract to purchase is in
effect on April 30, 2010, the
purchaser will have until
July 1, 2010 to close."
What if I am buying a piece of land and hiring a contractor to build a house?
Can you show me where you got this information from. I have read information from several sorces including NAR and have not seen this anywhere. Please advise.
Question: Can I keep my current house as a rental and still qualify for a new purchase tax credit?
Answer: You must sell your current home
I currently own a duplex and live in one side/rent one side.
I am looking to purchase a bigger home for my family, and will rent both sides of the duplex. Will I qualify for this tax credit?
Can you show me where you got this information from. I have read information from several sorces including NAR and have not seen this anywhere. Please advise.
Question: Can I keep my current house as a rental and still qualify for a new purchase tax credit?
Answer: You must sell your current home
Heide and Jesse - look at the chart above = the section called "current Home owner eligibility" says "Must have used the home sold
or being sold as a principal residence consecutively for 5 of the previous 8 years" - To me that clearly says current home sold or being sold - not kept as a rental.
Robert - you will probably need to wait until the IRS review of the law to determine if you will qualify. From the research I've done, that is one of the questions that is addressed definitively by the wording of the bill that was just signed.
The chart above comes from the National Association of Realtors, Government Affairs Division. This is a new bill - final determination of who qualifies is still subject to IRS determination of eligibility.
Thanks for the questions.
Who wrote this chart? I understand that the information is from National Association of REALTORS® Government Affairs Division, but did they write it and is all the information here? The link below is where I have been getting my updated information. Please read through this. No where here does it say that the buyer will need to sell their home. Infact, this link has way more detail then the chart has. If the home would need to be sold to qualify, don't you think that this would be in bold print. Thank you for your time and help! Copy and paste the following into your broswer: federalhousingtaxcredit.com/faq2.php
Page two of this artical(link below) states: "Would you have to sell your residence for it to qualify for the $6,500 credit, if you wanted to buy a new one? Not necessarily, Roth said. The home you purchase must become your principal residence, so you would have to move there. But nothing in the law says you cannot keep your existing residence as a second home or rental"
www.latimes.com/business/la-fi-perfin8-2009nov08,0,838088.column
Jesse - at this point I would wait until the IRS clarifies the law on this tax credit before you rely on anyone's interpretation. In the end, the IRS will decide if you can get that tax credit or not, based on keeping your current home.
This same type of questions arose over the 1st time home buyer tax credit, and now the IRS is investigating over 100,000 people who filed and may not have been eligible.
It's your call how you decide to proceed - all I can show you is what is out there in the form of information.
Shelby,
Thank your for your responce. I am a Real Estate broker in Portland Oregon. My office manager, owners & a cpa will be meeting with all the agent within our company today, to descuss the tax creit. I will pass on any new sold information regarding this manner. I agree that it's important that we have the information right and not rely on any interpretation. Thanks again!
Shelby,
Here's the information from the NAR website. The site address is below as well. We are being told that as long as you moved into your new purchased home before June 30th and "VACATE" the old property you should qualify. There is nothing that says that you cannot rent the vacated property. In fact they are encouraging people that didn't sell but have lost ("VACATED") their home through foreclosure in the past few year to repurchase and get the $6500. Please delete your statement above, saying that "you must sell your home", as this is your interpretation and your readers should speak to their tax adviser and not rely on anyone's interpretation. Thank you!
NAR- "Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight".
www.realtor.org/HOME_BUYERS_AND_SELLERS/2009_FIRST_TIME_HOME_BUYER_TAX_CREDIT
Well said Jesse. Thanks for the information, I will check with my tax guy.
Good Luck Tim!
Robert: Please see you the web address below. This should answer your question.
It states:
"Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be after November 6, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April 30, 2010)."
www.federalhousingtaxcredit.com/faq2.php
Jesse - Thank you for your comments and research. As I mentioned above, my information came from NAR - Govt Affairs Division, and my research this morning shows no change, so before I change the chart above, I would like to see an update from them.
I hate to give advice that potentially could get anyone in trouble with the IRS. I am still waiting to hear an interpretation from the IRS, since they will be the final ruling on this topic, not any CPAs nor the NAR. I think we all need to wait to hear from the IRS on this.
Thanks again for your comments.
What is meant by "Purchase by a dependant"? I was looking into buying a house from my father-in-law but my wife nor I are dependants of anyone. Would this disqualify us for the credit?
Great question - while you are technically not dependents of your father in law, I would advise you to check with a CPA about your eligibility for the tax credit for this purchase. Your wife is related, so this could potentially open up a "can of worms." Better to question first, don't you think?
I moved out of my house in May 2007, but it did not sell until September 2007. Since I was not living in the house, would I qualify as a first-time homebuyer in May 2010, or not until September 2010? If I qualify in May 2010, would I be able to sign a purchase agreement before the April 30, 2010 deadline, and close after the date in May that I moved out of my previous home?
Kyle
Technically you were still a home owner until Sept 2007, so you would not qualify for the first time home buyer credit, but you might qualify for the existing credit if you owned the home 5 years and resided in it for at least 3 of those years.
To absolutely clarify what I've just said, I would recommend that you check with your CPA - I am not a CPA, but am trying my best to interpret the way the law is written. There may be a loophole there for you that I am not aware of.
I bought my home in 2000 for $152000. I have lived here consecutively for all of those following years. Will I qualify for the existing hime owner credit of $6500?
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