Extension and Expansion of Homebuyer Tax Credit
The eligibility for first time buyers (the $8000 credit) remains the same – i.e., buyers must not have owned a principal residence for the 3 years prior to purchase. For the current homebuyer (the $6500 credit), the requirement is that they must have been in their current home consecutively for 5 of the past 8 years.
The new income limits as noted above apply to the full credit. There is a “phase out” of an additional $20,000 in each category (single and married); so buyers who fall within that income limit would get a reduced tax credit. In other words, single buyers who earn $145,000 or more would be totally ineligible as would married buyers who earn $245,000 or more.
This new law also places a limit on the cost of the home that is eligible – and that is $800,000. So, regardless of the income of the buyers, if the house is sold for more than $800,000 no credit would be received (do you think we’ll see a lot of $800k homes negotiated to a price of $799k?). And, remember, the credit is 10% of the purchase price, up to a maximum of $8,000.
The new law went into effect on the date it was signed by the President…so the new income limits and the extension to current homeowners is effective immediately.