Sunday, February 21, 2010

First Time Home Buyer Tax Credit is Expanded Repeat Home Buyer Tax Credit of $6,500

Is there a federal tax credit for repeat home buyers in addition to the first-time home buyer credit?

REACT BEFORE April 30th, 2010

It has been well documented that current affordable home prices, historically low interest rates and federal home buyer tax credit have combined to create one of the most attractive first-time buyer markets in recent memory.  However, it seems to be lesser known that a recent expansion of the home buyer tax credit has created an equally desirable opportunity for existing homeowners.

This past November, Congress elected to expand the home buyer tax credit to repeat buyers after seeing the success the temporary financial incentive had on the housing market and overall economy. As a result, current homeowners who will have lived in their home for five consecutive years out of the last eight years may now be eligible to receive a $6,500 tax credit. The expanded tax credit offers a great financial opportunity for existing homeowners.

To qualify for the tax credit, the repeat home buyer must have signed a binding contract by April 30, 2010 and close on the home by June 30, 2010. Tax credit eligibility is subject to income limits, $125,000 for single buyers and $225,000 for couples. In addition, the sale price of the home being purchased cannot exceed $800,000.  The home cannot be purchased from a close relative including a parent, spouse, child, grandparent or grandchild.

Repeat buyers can claim the $6,500 credit on either their 2009 or their 2010 tax return, whichever is best for them.  A buyer who earns no taxable income or doesn’t owe any federal income tax can qualify for the tax credit and simply file a tax return to collect it.

There is no requirement that existing homeowners must have sold their home to be eligible for the $6,500 tax credit. But, if you prefer to sell your current home first you will need to react quickly to allow for time to get your home sold.  It is taking three months or longer to sell a home.  That is why it is critical repeat buyers put their home on the market right away.  Otherwise, you might not allow enough time to both secure a buyer for your current house and find a new home by the April 30th deadline.