First Time
Homebuyer Tax Credit: Read
what you should know here.
House votes to extend homebuyer credit 3 months
WASHINGTON
– June 30, 2010 – Homebuyers would get an extra three months to
complete their purchases and qualify for a generous tax credit under a
bill overwhelmingly passed by the House on Tuesday.
Under current law, homebuyers who signed purchase agreements by April
30 have until today, June 30, to close on the sale to qualify for tax
credits of up to $8,000. The bill would give buyers until Sept. 30 to
complete their purchases.
The extended deadline only applies to people who signed purchase
agreements by April 30. The National Association of Realtors estimates
that about 180,000 homebuyers who already signed purchase agreements
are likely to miss the deadline.
“We owe this to the people who have essentially followed the rules who
are caught by a closing date,” said Rep. Sander Levin, D-Mich.,
chairman of the House Ways and Means Committee.
The bill passed 409-5. It now goes to the Senate, where senators were
working Tuesday evening on a bill that would extend the tax credit and
extend unemployment benefits for workers who have been laid off for
long stretches.
The Senate could vote on its bill as early as this week – if senators can round up 60 votes to overcome a filibuster.
The popular tax credit has helped to stabilize the nation’s slumping
housing market. Nearly 3 million taxpayers claimed the tax credit
through May 22 – claiming more than $21 billion – according to the
Treasury Department.
The Realtors group says the tax credit has generated 1 million new home sales that wouldn’t have happened otherwise.
The bill would also make it easier for the Internal Revenue Service and
state prison officials to share information about inmates in an effort
to fight fraud. The Treasury Department’s inspector general for tax
administration reported last week that nearly 1,300 prison inmates had
improperly received more than $9 million in homebuyer tax credits while
they were locked up.
The report said the IRS did not have up-to-date information on inmates.
The tax credit for first-time homebuyers was part of President Barack
Obama’s economic recovery package enacted last year. In November,
Congress extended the credit and expanded it to longtime owners who
bought new homes. First-time buyers were eligible for a tax credit of
up to $8,000. Current owners who bought and moved into another home
could qualify for a credit of up to $6,500.
The Realtors group has been pushing hard in Congress for the extension.
Mortgage lenders, the trade group says, have been swamped with
borrowers trying to get approved by the end of the month.
Delays with mortgage lending and appraisal companies have meant that home sales are taking far longer to complete this year.
“A lot of lenders weren’t able to handle the influx of loans that came
with the tax credit,” said Lucien Salvant, a spokesman for the National
Association of Realtors.
There have been particularly long delays for buyers of so-called short
sales – ones in which banks agree to accept less than the total
mortgage amount. In Las Vegas, for example, short sales made up nearly
a third of all sales last month.
Many banks “just don’t have the process to the point where they can do
it in a reasonable amount of time,” said Jack Woodcock, a real estate
agent in Las Vegas. Extending the tax credit deadline, he said, would
be a welcome relief to those borrowers, many of whom “made their
decision based upon that tax credit.”
On November 6,
2009, President Obama signed a bill into law that immediately extended the
popular tax credit program offering up to $8,000 for qualified first-time
homebuyers (FTHBs) into the first half of 2010.
The bill also instantly expanded the program, offering up to $6,500 in tax
credits for qualified repeat home buyers, swinging open the door for even more
qualified homebuyers to take advantage of this valuable opportunity at a time
when mortgage rates are still near historical lows.
First-Time Buyers
For FTHBs (defined as someone who has not owned a primary residence in the
previous 36 months, prior to closing and the transfer of title), the basic
rules remain the same, with one important exception – higher income limits are
now in place, increasing the pool of potential buyers eligible for the tax
credit of up to 10% of the purchase price or up to $8,000. This is money that
does not have to be repaid as long you stay in your new home for at least 36
months.
Single tax filers who earn up to $125,000 are now eligible for the total credit
amount. Those who earn more than this cap (but less than $145,000) can receive
a partial credit. Joint filers who earn up to $225,000 are eligible for the
total credit amount. Those who earn more than this cap (but less than $245,000)
can receive a partial credit.
Repeat
Buyers
The new homebuyer program offers an exciting new opportunity missing from the
previous incentives – a tax credit of up to $6,500 for qualified purchasers who
have owned and occupied a primary residence for a period of five consecutive
years during the last eight years. This gives those who already own a
qualifying residence some additional reasons to take advantage of lower home
prices and interest rates and finally move up to the home of their dreams.
Important Deadlines
Purchase agreements must be signed by April 30, 2010, and closings must be
final by June 30.
Get the Facts
There are other important rules and guidelines you must meet to qualify for
this great opportunity. So, if you or someone you know has missed out on the
first two home buyer tax credit programs in the last two years, don't wait.
Give us a call today. We'll gladly review your situation and see if you can
benefit from this new and improved program.
From Home
& Money Quarterly Newsletter by Mark Mathiason, Mortgage Corporation of America
Q&A clears the air about homebuyer tax credits
McLEAN, Va.
– Nov. 25, 2009 – If you’re in the market for a home, the world is your oyster.
Interest rates are at record lows. Housing prices in many parts of the country
are still depressed. And you may be eligible for a generous tax break, even if
the home you buy isn’t your first.
On Nov. 6, President Obama signed legislation that provides a $6,500 tax credit
for some current homeowners who buy another home. The law also extends the
$8,000 tax credit for first-time homebuyers, scheduled to expire Nov. 30, until
next spring.
A lot of people are interested in taking advantage of this tax break, but the
expanded credit also has whipped up a lot of confusion. Here are some answers
to frequently asked questions:
Q: How do I qualify for the $6,500 credit?
A: This credit is available for homebuyers who sign a binding contract on a new
or existing home by April 30, 2010, and settle by July 1 (deadlines that also
apply to the first-time homebuyer credit). You must have lived in your existing
home for five consecutive years out of the last eight. The home you purchase
must be your primary residence. However, the law doesn’t require you to sell
your old home, says Bob Meighan, vice president at TurboTax, the tax software
provider. You can use it as a second home or a rental and still claim the
credit, he says.
Q: I sold a home I had lived in for more than five years and bought a new one
in August. Do I qualify for a tax credit?
A: No. For existing homeowners, the $6,500 credit is limited to homes purchased
after Nov. 6.
Q: Does the home I buy have to be more expensive than the one I own now?
A: No. While the real estate industry is hopeful that homeowners will use this
credit to buy a nicer place, there’s no prohibition against using it to
downsize, Meighan says. That makes this credit particularly useful for seniors
who are interested in moving into a smaller home.
If you are planning to move up, keep in mind that you can’t claim the credit if
the purchase price of the home exceeds $800,000. Unlike some other tax credits,
this one doesn’t slowly phase out once you exceed the threshold, Meighan says.
If you buy a home for more than $800,000 – and that refers to the purchase
price, not the assessed value or the amount of your mortgage – you are
ineligible for the credit, period.
The $800,000 cap also applies to first-time homebuyers, but only those who
purchase a home after Nov. 6. First-time homebuyers who bought a home for more
than $800,000 between Jan. 1 and Nov. 6 can still claim the credit, assuming
they meet the other criteria, Meighan says.
Q: I’m an existing homeowner, and would like to build a new home. Can I claim
the credit?
A: Yes, but make sure your builder is good at meeting deadlines. You can claim
the credit as long as you have a binding contract in place by April 30 and
close by July 1. In the case of a new home, the closing date is the day you
move in, Meighan says. If your home isn’t habitable by June 30, you won’t be
able to claim the credit, he says.
Q: I bought a home in 2008 and claimed the old $7,500 first-time homebuyers
credit, which must be repaid over 15 years. Did the new law change that rule?
A: No. That credit, which was available for homes purchased between April 9,
2008, and Dec. 31, 2008, must still be repaid.
The $8,000 first-time homebuyer credit, available for homes purchased after
Dec. 31, 2008, doesn’t have to be repaid as long as you remain in the home for
at least three years. Existing homeowners who qualify for the $6,500 credit
don’t have to repay that money, either, as long as they meet the three-year
requirement.
Q: We have a rental home and would like to sell it to our son, who has never
owned a home. Would he qualify for the first-time homebuyer credit?
A: No. The legislation specifically prohibits taxpayers from claiming the
credit if the sale is between “related parties,” Meighan says. A home sale to a
parent, grandparent, child or grandchild would fall into that category.
Q: I sold my home this year and have been renting since. If I buy a new home,
do I qualify for the expanded credit?
A: Yes, as long as you meet all of the other requirements, says Mel Schwarz,
partner with Grant Thornton in Washington,
D.C. The eight-year period used
to determine eligibility ends on the day you buy your new home, he says.
Where’s the refund? WASHINGTON –
Dec. 14, 2009 – First-time homebuyers who bought as long ago as last winter are
still waiting for their $8,000 tax refund.
As of mid-September, more than 1.4 million taxpayers had requested the credit
by amending their federal tax returns. The IRS announced in October that it
expects 5.1 million claims by year-end. That count doesn’t reflect the
extension and expansion of the credit in November.
IRS spokeswoman Carrie Resch says the agency is experiencing a higher-than
normal number of amended returns and because amended returns are reviewed by
hand, the process is delayed.
Copyright
© 2010 The Associated Press, Stephen Ohlemacher, Associated Press
writer. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. Associated Press writer Alan
Zibel contributed to this report.
