It’s officially passed the House and Senate, and is now awaiting the President’s signature. Along with the extension of the $8000 First Time Buyer credit (now applies to any buyer under contract by April 30, 2010 and settling by June 30, 2010), there is now a new credit category: long-time residents of the same principal residence which has been given the shorthand name of “move up buyers”–though in reality it could just as easily apply to “move down buyers.”
If a homeowner has owned and used the same residence as their principal residence for any five consecutive years in the last eight (as of the date of purchase of a subsequent residence), then they are treated as a “first time home buyer” eligible for a (up to) $6500 tax credit when they file their next return. Other key points:
- This credit applies to purchases under contract between December 1, 2009 and April 30, 2010.
- Income limits are higher than with the previous credit: $125,000 AGI for a single individual and $225,000 AGI for a married couple (and then phases out until $145k/$245k).
- Homes with a ‘purchase price’ (as defined by the IRS) above $800,000 are ineligible.
- Thanks to all the fraudsters out there, purchasers must now submit documentation of purchase along with their tax return.
Some other restrictions apply (e.g., must keep the home for at least a year), but the key points are above. Update 11/14: here’s a nice summary article that appeared in the Washington Post. Some other FAQs that have since been answered:
- There is no requirement that you sell your current home. You can rent it out, or sell it later. BUT you must occupy the new home as a primary residence
- Many types of dwellings are eligible: new construction, existing homes, condos, mobile homes, or boats that function as a primary residence BUT in no case can it cost more than $800,000 or the property is ineligible.
- If you close between Nov 6 and Dec 31 of 2009, you can claim the credit on your 2009 return or even amend your 2008 return (important to know if your income has changed, making you ineligible in 2010!)
This is key news for our area, which has seen a dramatic drop in housing inventory, especially at the first time buyer price point–this could well create demand in the next category up (up to $800,000 that is) of homes, and will create some breathing room, inventory wise, for the continuing first time buyer demand.
This could be the ideal time for these move-up or move-down buyers:
- Prices for inventory at the first time buyer price point are stable or even rising
- Interest rates are still at historic lows
- Upper end homes have dropped (and are continuing to drop) in price
Combine these three points and you get “sell high” and “buy low”. If you’re thinking of selling your home to “move up” or “move down” and want more information on the tax credit, please contact me.
Read More: Why is the $6500 tax credit important?
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