Tax Credit Info

After posting the last story on how the tax credit has helped, I realized I didn't post anything after it was passed so, here goes.

The following excerpt is from this story on CNNMoney.com. As always this is a complicated piece of legistlation that can be difficult to understand. For example the move up credit does not require that you in fact, move up. So please visit http://www.howardhannaholt.com and contact one of our REALTORS to learn more.

$8,000 homebuyers tax credit extended

President Obama reups popular tax credit through June 2010 and expands it to include people with higher incomes and some who want to trade up into new homes.

NEW YORK (CNNMoney.com) -- President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday.

The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June. Homebuyers must sign a contract before April 30 and close by June 30. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.

The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers -- those who have not owned a home in the past three years -- still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.

"The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules," said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

Who qualifies?

Nicholas provided four scenarios illustrating how the tax credit rules for existing homebuyers will apply:

• Harry owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.

• Sue purchased a home in 2004 and has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.

• Jane purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.

• Mark purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.

Chautauqua County Homes

More info, from an article in the LA Times

But the new law adds a $6,500 credit for "longtime residents of the same home," making it a boon for retirees and those nearing retirement who want to trade down to smaller homes or perhaps move to a sunnier locale.
Both the $8,000 and $6,500 versions of the credit are refundable--meaning if you don't owe that
much in taxes, you get a check back from Uncle Sam.
"It's a windfall for those already set on downsizing," marvels Timothy W. Wyman, a financial
planner with the Center for Financial Planning in Southfield, Mich.
Even if you're not set on downsizing, it's something to consider if you're nearing retirement.
Recent research suggests that the happiest retirees are those who move to new homes while
remaining in their longtime communities.
To claim either the $8,000 or $6,500 version of the credit, you must close on a new home, or be
locked into a contract to close on one, before May 1, 2010. The closing itself must occur before
July 1, 2010.
The new law still gives first-time home buyers a more generous credit: 10% of the purchase price of the new home up to $8,000. But taxpayers who have lived in their olds home for five out of the eight years prior to closing on a new one, can claim 10% of the purchase price on a new home,
up to $6,500.
That could help downsizers on both ends--their new smaller digs will snag them the $6,500 credit and prospective buyers of their old homes are more likely to qualify for a credit too. After all, if an older couple is downsizing, they're probably not selling a starter home. So prospective buyers are likely to be trading up from an existing residence themselves. Congress did put some limits on this.