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First-Time Homebuyer Credit Continued, New Seller Credit Created

by Peter G. Miller
November 9th, 2009

President Obama has signed HR 3548, the Worker, Homeownership, and Business Assistance Act of 2009, legislation which should help FHA borrowers — but legislation which is likely to be re-done early next year.

When last we left off with the first-time homebuyer tax credit, first-time purchasers could get as much as $8,000 in yummy tax reductions if only they would please, please buy a home and buy one before December 1st. Most importantly, buyers in 15 states could — in some cases — actually borrow with an FHA mortgage and buy with nothing down.

With December 1st soon upon us, the government responded in two ways — it extended the deadline until April 30th AND it improved the benefit. What is did not do was increase the first-time write off to $15,000 from $8,000 as some in the real estate industry wanted.

Okay, so what’s really new here?

Current Buyers

The first-time homebuyer credit is no longer just for first-time homebuyers — think of the term “mission creep.” The program has been expanded to include many current homeowners as well.

The deal for current homeowners works this way: If you have owned a home for five consecutive years out of the last eight and purchase a new principal residence between November 7, 2009 and April 30, 2010, you can get a tax credit of up to $6,500

Income

One of the qualification factors under the 2009 credit was that you could not have an income of more than $75,000 if single or $150,000 if married. The new rule increases the income limits to $125,000 for singles and $225,000 for joint filers to get the full write-off. (You can get some credit — but not the entire credit — with an income of as much $145,000 if single and $245,000 for couples. Above that, nothing.)

In essence, what this does is to open the program to buyers who are looking for more expensive homes and will max out the tax credit. However, the value of the property cannot exceed $800,000.

When

To qualify for the new first-time credit you must purchase between November 7, 2009 and April 30, 2010. However, by “purchase” the government means having a signed contract in hand — you can actually close as late as July 1st, 2010. If you have any concerns regarding deadlines, check with your broker and the IRS.

Which Homes?

Basically the new credit applies to just about any prime residence — think of single-family homes, condos, townhouses, and co-ops. Be sure to first check with the IRS if you plan to claim something unusual as a first-time home — a boat, a trailer on wheels, etc.

How Long?

As before you have to keep the property for at least three years — otherwise you may have to give back the credit money to Uncle Sam.

A lot of people have looked at the first-time homebuyer credit program and discovered that they do not qualify — after buying a home! Be sure to get a copy of IRS Form 5405 and check out related information on the IRS site before considering the credit.

Because the legislation only extends the benefit until April 30th, look for another piece of legislation next year to extend the credit for additional time.

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This entry was posted on Monday, November 9th, 2009 at 12:53 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

One Response to “First-Time Homebuyer Credit Continued, New Seller Credit Created”

  1. Carie Says:

    Hello,
    When applying for the FHA loan, does the FHA have access to IRS records to double check the application for credit?

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