Dennis Norman
UPDATE 11/06/09 5:14 p.m. –Thanks to Denis T who was commenting on this post,click here to go to the IRS site with information on the new tax credits.
UPDATE 11/06/09 1:00 p.m. –I just heard that a short while ago President Obama signed the bill into law. IT’S OFFICIAL! So if you are in the market for a home .. Go For It!
UPDATE 11/06/09 9:20 a.m. –Still waiting for President to sign bill…However there have been a ton of inquiries from existing homeowners that are either already under contract to buy a home or getting ready to do so that want to know when the new credit is effective….My opinion (for what its worth) was that the bill goes into effect when the President signs it and after that date is when existing home owners are eligible…Other question is whether the date of purchase is based upon the contract date or closing (settlement) date..My guess was that it was the settlement or closing date because in the new bill you are required to submit the closing statement with your tax return but not the contract. For both issues I was just basing this on my interpretation and was looking for an interpretation of it from someone smarter than me..I found it…just a few minutes ago the National Association of Realtors sent out an email with a link to some FAQ’s on the new credit –included in the FAQ’s was the following question addressing this issue…looks like NAR’s take is the same as mine,let’s hope we’re right:
Question:I am an existing homeowner. On October 25,2009,I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement,will I qualify for the new $6500 tax credit?
Answer:Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase,which is generally the date of settlement.
UPDATE 11/05 5:35 pm –The National Association of REALTORS has prepared an outline that shows the difference between the original tax credit and the new extended and expanded tax credit. I think it is pretty helpful and includes effective dates of the changes. Many of the effective dates are based upon when President Obama signs the bill which may be tomorrow. Click here for NAR outline.
According to Fix Housing First the House of Representatives has just passed the extension and expansion of the home buyer tax credit by a vote of 403-12. Now it goes on to the President for his signature which is expected today or tomorrow.
To read the section of H.R. 3548 that contains the details concerning the first-time home-buyer tax credit click here.
If you care to read the entire bill click here.
I’ll keep you posted as I learn more…
Below is a recap of provisions in the amendment from the National Association of REALTORS(R):
- Credit available for purchases before May 1,2010. Prospective purchasers with binding contracts in place as of April 30,2010 will be allowed an additional 60 days to complete the transaction.
- Credit remains at $8000 for first-time purchasers. No change to definition of first-time purchaser.
- New $6500 tax credit for repeat buyers who purchase between December 1,2009 and May 1,2010. Repeat buyers must have lived in their homes consecutively for 5 of the previous 8 years.
- Income limits are expanded to $125,000 on a single return and $225,000 on a joint return. Current law $20,000 phase-out retained.
- New anti-fraud limitations are imposed.
Related posts:
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Homebuyer Tax Credit Update –For buyers that did enter into a contract on or before the extended deadline of April 30th but are struggling to get their deal closed by the July 1st deadline,I have good news…Congress may extend the deadline for closing until September 30th….a bill amendment doing just this passed the Senate yesterday…the underlying bill has not passed yet….complete ifo and future updates will be at:
http://realestateconsumernews.com/home-buyers/senate-passes-key-amendment-to-extend-closing-deadline-for-homebuyer-tax-credit/
Hi Dennis,
I recently saw the Extended Home Buyer credit info on the IRS web page:
http://www.irs.gov/newsroom/article/0,,id=215827,00.html
And it said there is a limit of $800,000 on the purchase price of the house. We bought our house in Sept. 2009,and we have an income of less than $75,000,so we qualify for the first-time home buyer credit under the rules I had read back in April 2009,for the regular (not extended) home buyer credit. However,now (March 2010) on the IRS FAQ,it says that we (personally) are eligible,but our house is NOT! Now it says that a house must be below $800,000 purchase price to qualify,and it DOES NOT SAY that this new purchase price limitation (as I would expect) only applies to the extended credit program.
http://www.federalhousingtaxcredit.com/faq1.php#11
What’s going on? Was this $800,000 limit there all along,and I just missed it somehow? Or does it only apply to the “extended”program,and the IRS just forgot to make that distinction on the web site FAQ?
Thanks!
-Anne in San Francisco
Question:my partner will be moving in with me this summer (2010),and buying half the house from me;his name will be on the title. He has never owned a house before,or lived in mine. I’ve lived here 7 yrs,and will continue to do so. Will he qualify for the new homeowner tax credit? And if so,does he get 10% of price I paid 7 yrs ago,or 10% of his half (i.e. half that).
Mary,
Wow,that’s a tough one…First,as far as a new home,below is a FAQ from the IRS website which indicates your “purchase date”is when you first occupy the home…So,if that is going to be February 2010 you are looking good…
Q. When do I have to buy a new home to get the credit?
A. The credit is available for eligible home purchases after April 8,2008. You must enter into a binding contract to buy the home before May 1,2010 and close before July 1,2010,in order to obtain the credit. For a home you construct,the purchase date is considered to be the date you first occupy the home. (11/19/09)
Now,for the question re the $800k limit,here is what the instructions say for entering on the “price”of the home on Form 5405 (the hrom used to claim the credit)
“If you build,or contract to build,a new
home,your purchase price includes costs of construction.”
So,it doesn’t specifically say you would include the cost of the lot but personally I think that is implied and is probably the case. However,I’m not a CPA nor tax attorney and would suggest you talk with someone in one of those professions to confirm.
I have done an updated post that includes the new IRS form for claiming this credit as well as instructions on completing the form from the IRS…this post is at:
http://realestateconsumernews.com/home-buyers/irs-releases-instructions-on-how-to-claim-homebuyer-tax-credit/
Good luck,
Dennis
How does this credit work if you are building a house with land you bought previously? The sum of the land price plus the building contract exceeds $800,000. But they are two compeltely different transactions. I purchased the land from an individual in October,2008 and signed a building contract with a builder in May,2009. House will be ready in February,2010. Am I disqualified from the credit?
My Question is:
Me and a friend bought a house in 1999. My name is the only one on the mortgage,taxes,utility bills,etc. but both names are on the Deed. We file separate returns and I have been the one to claim taxes,etc. on my return. We have both lived in this house since 2000. She wants to buy her own house now. Is she eligible for the $8k first time home owners tax credit?
Thanks!
Can someone help us? We bought our house in Sept.2009 from my husband’s half brother. Do we qualify since it says that close relatives are your parents,child,and grandparents. Also,I have another ? we just realized that my husband’s mom is the co-signer for my husband’s half brother of the house we just bought so does that mean she’s a close relative even though it wasn’t her primary residence nor did she pay for the mortgage? Thanks.
Hi Dennis,
I just got another question I hope you can help. For the 5 year period,our current house is settled on 2005/1/27,however,in the county’s record,it shows the date as 2005/3/7. So should the 5-yr period count from 1/27 or from 3/7? Since this will affect our closing date on the new house.
thx
You are welcome Elizabeth..Happy New Year
Thanks Dennis &Ron for the (unfortunately accurate) information,creative solutions,&commiseration!
My husband &I have been married 1 year. He has owned the condo where we live for 8 years. I have never owned real estate &have been living in the condo since we got married.
It seems we don’t qualify for either the $8K or $6500 tax credit. Is that true? Why would the law be written to exclude our situation?
HI Elizabeth,
Below are some FAQ’s from the IRS site that I think address your situation…it appears that you are correct that you are not eligible for either credit as it appears you and your husband must both meet the requirements for a repeat buyer or a first time buyer…you should confirm this with a CPA or tax attorney though to be sure….Take care,Dennis
Married and Co-Purchasing Homebuyers
Q. I am a long-time resident (have owned and used my current home as a principal residence for five consecutive years out of the eight-year period ending on the date of purchase of the new residence) but my spouse has lived there for only three years. Can we qualify for the long-time resident homebuyer credit if we purchase a new principal residence?
A. No. Both spouses must have owned and used the same previous principal residence for five consecutive years out of the 8-year period ending on the date of purchase of the new principal residence to qualify for the credit. (12/14/09)
Q. I am a long-time resident and current homeowner and my spouse is a first-time homebuyer (has had no ownership interest in a principal residence during the three-year period ending on the date of purchase of a new principal residence) and we purchased a new principal residence. Can we qualify for either the first-time homebuyer credit or the long-time resident homebuyer credit if we purchase a new principal residence?
A. No. Both you and your spouse must be first-time homebuyers in order to qualify for the first-time homebuyer tax credit. Since you had an ownership interest in a principal residence during the three-year period ending on the date of purchase,neither you nor your spouse qualifies for the credit. Similarly,both you and your spouse must be long-time homeowners of the same previous principal residence in order to qualify for the long-time resident homebuyer credit. Since your spouse is not a long-time homeowner of your current principal residence,neither of you qualify for the credit. (12/14/09)
Q. I am a long-time homeowner of a principal residence and my spouse is a long-time homeowner of a different principal residence. Can we qualify for the long-time resident homebuyer credit if we purchase a new principal residence?
A. No. Both spouses must have owned and used the same previous principal residence for five consecutive years out of the eight-year period ending on the date of purchase of the new principal residence to be eligible for the credit. Since you and your spouse owned and used different principal residences,neither of you qualify. (12/14/09)
I got married 3 months ago and fall under the same situation as Elizabeth3121 above. We have been thinking about getting a quick divorce so that we would qualify for the tax credit and then remarry once we close on the new house in a month.
It’s sad that the government would punish those of us that decided to get married instead of just living together in ‘sin’.
We signed the contract of sale for our house on June 15th of 2005,and closed on July 15th 2005. Is there any way that we can benefit from the existing home owners tax credit. Could we say,get a contact on the house before April 30th but close after June 15th to meet the 5 year requirement,or is the 5 years based on the date of closing?
I’m so angry that it looks like we may miss out on this tax credit too.
hello,
regarding the current homeowner tax credit:i have owned my home for 10 years. i refinanced with my partner last year and placed her on the mortgage. we are looking to buy another home in both our names. will i be able to get the tax credit even if there is another name on the mortgage? i know she doesn’t meet the requirement,although she has lived here long enough,she wasn’t on the mortgage.
My wife and I lived in the same house we owned for 16 years,then we bought a different home and moved less than two years ago. We are looking at buying a home and moving again. Would we qualify for the $6,500 tax credit because we lived in the same home for more five years out of the last eight (even though we’re selling a different home)?
MM
If you lived in your principal residence for 5 consecutive years and,as of the date of closing on your new home,the 5 year period began not more than 8 years ago,and you close on your new home before April 30,2010 (or potentially June 30,2010 since I assume you have a binding contract),then provided you meet the other qualifications (under max income,$800,000 or less purchase price,etc) then I think you are good to go…
Of course,check with your CPA or tax professional as I am not a CPA or attorney..
Good luck
So,we sold my house about two years ago (we lived there for a little more than 5 years) and have been living in an apartment since. We are under contract with a new construction (since September) but will not go to settlement until maybe early February 2010. Will we be qualified for the $6500 tax credit?