Home buyers rejoice! Good news has come for the housing market! On November 5, 2009, The Worker, Homeownership, and Business Assistance Act of 2009 extended the tax credit available to first time home buyers, in addition to adding in a new credit for existing homeowners.
What does this mean for home buyers? It means an excellent opportunity to take advantage of a limited time offer! Here is a quick breakdown of who qualifies for each credit and what the rules are.
First Time Home Buyers
For first time home buyers, i.e. buyers who have not owned a principal residence during the prior 3 years, the credit of 10% of the purchase price up to a maximum of $8000 has been extended and now allows these buyers to take advantage of the credit through April 30, 2010. An extra bonus is that those buyers with binding contracts as of the April 30 deadline will have until June 30, 2010 to actually close.
The income limits have also been raised with the extension. For single buyers, the annual income limit is $125,000. For married buyers who file joint returns, the limit is now $225,000. Keep in mind, for married taxpayers the law tests the homeownership history of both the home buyer and his/her spouse.
Existing Homeowners
New to the Act is a credit for buyers in the “trade in” or “move up” market. Now, home buyers who have owned and resided in a home for at least 5 of the last 8 consecutive years are eligible for a credit of 10% of the purchase price up to a maximum of $6500. And even better, the new home purchased does not have to be a more expensive home to qualify, which is great news for those who are empty nesters or who may be downsizing. The annual income limits and homeownership history for these “move up” (or “move down” in some cases) buyers is the same as the first time home buyer.
Common Ground For Both Plans
The rest of the rules for qualifying are the same for both tax credit opportunities. Homes that qualify for the credit include single family residences, town homes, condominiums, manufactured (mobile) homes and houseboats. Additionally, the home being purchased must be less than $800,000. The home purchased can be either new or resale, but there are exclusions. The home cannot be purchased from a family member, ancestor (parents or grandparents), lineal descendant (children or grandchildren), a spouse or spouse’s family members.
Since fraud had become a problem with the prior Act, the new law also contains anti-abuse measures. Included in these changes is a rule that most buyers must be 18 or older, and the credit may not be taken if the buyer is claimed as a dependent on anyone else's tax return. Also, proof of purchase of the home must be furnished for the buyer to qualify for the credit.
This is a great opportunity for home buyers across the board. The available tax credit, combined with still low mortgage interest rates, should continue to help spur housing sales. This of course means good news for everyone in these trying economic times where we have seen record setting numbers of foreclosures in the housing market. Just remember, this extension is likely the last one so act quickly!
Lorena O’Connor is the Team Manager for The Graham Group, a premier team of real estate professionals specializing in Atlanta Real Estate. She works under the direction of Broker/Owner Lee Graham, and their areas of expertise include Residential, Foreclosures, and Short-Sales. View more information at www.GrahamGroupAtlanta.com.
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