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HelpIn November 2009, President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 which included an extension of the original $8,000 first-time home buyer tax credit and also created a new, $6,500 credit for current homeowners buying a new home. The credit is available to qualifying buyers who sign a binding sales contract on or before April 30, 2010, and close by June 30, 2010.The original credit was scheduled to expire as of November 30, 2009.
Here are the key points buyers should be aware of when purchasing a new home:
- The first-time buyer credit is available to those who have not owned a home for at least three years prior to the date you close on your new home.
- The repeat home buyer credit applies to anyone who has owned a home for five consecutive years out of the prior eight years.
- The credit is available only for owner-occupied properties, not rental properties or vacation homes.
- Income caps of $125,000 for individuals and $225,000 for married couples filing jointly apply.
- Credits only apply to homes bought for $800,000 or less.
- Homes bought from relatives of the taxpayer or the taxpayer’s spouse are ineligible. The IRS defines relatives as ancestors (parent, grandparent, etc.), lineal descendants (child, grandchildren, etc.) and spouses.
- Married couples are ineligible for the first-time home buyer tax credit if either spouse has owned a home in the previous three years. They may, however, qualify for the repeat home buyer tax credit.
- Neither credit has to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within the three years following the initial purchase.
- Taxpayers must submit a copy of their HUD-1 settlement statement and IRS Form 5405 with their tax return to claim either tax credit.
- Special rules apply to members of the military, the foreign service and the intelligence community.a) Qualified service members who sell or move within three years of the initial purchase due to official extended duty are exempt from the recapture rule.
b) For qualified service members on extended duty, the tax credit applies to sales with a contract in place on or before April 30, 2011 and closed by June 30, 2011.
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