Here is all the information you need to take advantage of the $8,000 and $6,500 tax credits, the Florida Homebuyer Opportunity Program, the FHA downpayment plan, and the First-time Homebuyer Tax Credit IRS Form 5405.
Since the $8,000 tax credit was extended and the $6,500 homeowner credit was added there has been quite a bit of confusion as to show can qualify for what, so I’d like to try and clear it up:
Basic Guidelines
- In order to receive the $8,000 credit you may not have owned a home in the past three years before closing on the new property. In order to receive the $6,500 credit you must have owned and lived in your primary residence for five concecutive years during the previous eight years before closing on a new property.
- You must sign a contract on a home by midnight, April 30th, 2010, and close on the property by midnight, June 30th, 2010.
- The income limits have been increased to $145,000 for single filers, and $245,000 for those filing jointly, though to get the full credit single filers cannot make more than $125,000, and joint filers cannot make more than $225,000.
- There is no credit available for the purchases of homes over $800,000.
- If you sell the new home withing three years you will have to repay the credit.
Frequently Asked Questions
Existing homeowner credit: Must the new house cost more than the old house?
No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.
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?
Yes. The existing homeowner credit goes into effect for purchases after the date of nactment (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.
I am a first-time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range).
I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?
No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.
I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did since 3 years doesn’t impact eligibility.
I am an eligible first-time homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.
Additional Information
What you should know about the $8,000 Tax Credit
The Florida Homebuyer Opportunity Program
The FHA Downpayment Plan
Instructions for using IRS Form 5405
First-time Homebuyer Tax Credit IRS Form 5405
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