There is a lot of uncertainty and misinformation circulating about the newly extended and expanded home buyer tax credit. I will try to end some of the confusion here, by highlighting the main criteria and answering some frequently asked questions.
First of all, who is eligible? You qualify for up to an $8,000 tax credit if you have not owned a principal residence for the last 3 years (the IRS uses this definition of a “first time buyer”).
You qualify for up to a $6,500 tax credit if you have owned a principal residence for five consecutive years, out of the last eight years, and now purchase a “replacement” principal residence.
I say up to because the credit is 10% of the purchase price, with a maximum of $8,000 for “first time” buyers and a maximum of $6,500 for “replacement” buyers.
There are also income requirements that all buyers must meet. A single buyer can make no more than $125,000 in “modified adjusted gross income” and those filing jointly cannot exceed $225,000. There may be a portion of the credit available to those singles filers who make between $125,000 and $145,000 and joint filers with income between $225,000 and $245,000; check with your accountant for exact amounts, if your income is within that range.
There are also a few new rules. First, the new home cannot cost more than $800,000. Also, you must be at least 18 to be eligible and lastly, anyone who is counted as a dependent on another’s tax return is not eligible for the credit.
All buyers must have a written accepted offer by April 30, 2010 and must close on that transaction no later than June 30, 2010.
Once you have closed on the new home, use IRS revised Form 5405 (will be downloadable from their web site www.IRS.gov late 2009) to claim the credit.
Please feel free to contact me with specific questions. This is a wonderful opportunity to take advantage of the current market!