This is greatest of the home home purchase stimulation incentives to come out of congress in the last couple of years. The Worker, Homeownership and Business Assistance Act of 2009 expands the first-time home-buyer credit allo. The rules extend the cutoff dates to homes under contract by April 30, 2010 and closing no later than June 30, 2010.
But, what I think is the greatest change is the “Move-Up” credit. I provides $6500 for existing homeowners. ”Move-up is actually a misnomer. This applies to a wide variety of circumstances where existing home owners (owned & resided in the same home 5 of the last 8 years) purchase a new primary residence.
In keeping with the motive to stimulate the economy, there is no requirement to buy a more expensive home or to sell your existing home! You can keep your existing home and use it as a second home, convert it to a rent house and still qualify for the credit. For example, if you need to relocate for a new job but don’t want to sell your current home in a down market the this will help you. If you find a screaming deal on a home you want to make your new primary residence this will help you. If you want to downsize, and move into a smaller, more efficient home, this will help you.
To get the clearest understanding of the rules you should consult a tax professional but here are some general guides. See IRS form 5405 . Additionally, the National Associati0n of Home Builders put up a nice site on this as well. NAHB site
For this one the close must take place after Nov.6, 2009 with the same cutoff dates as the first-time home buyer credit. The income limitations are now more generous as well. Eligible incomes for both credits are $125,000 for singles and $250,000 for married filers, up from $75K & $150K . The credit is %10 of cost and the home cannot cost more than $800,000. Additionally, now a copy of the HUD-1 must be submitted with a copy of the tax return.
The first time home buyer credit is maxed at $8000.
The Move up credit is maxed at $6500.
Purchases in 2010 can be claimed on a 2009 return.
For both credits, Married couples have the tests of non-ownership (or ownership) applied to each spouse. That is if either spouse does not qualify then there is no credit available.
Neither credit has to be repaid unless the home is sold or ceases to be the primary residence within the first three years after purchase.
Due to prior abuse, is a new senate requirement on the IRS to more closely scrutinize the credits claimed. Sales between closer related parties, to minors or those claimed as dependents on other’s returns are ineligible. While this bill is the third and biggest home buying credit to come out in recent years, some of it’s primary authors insist there will be no more. All political and budget indications are that this ride is about over as well.
Michael White, CPA