UPDATE: The deadline for getting an accepted contract for this tax credit has passed. In order to get the tax credit, buyers needed to be in an ACCEPTED contract by 4/30/10 and close on that contract by 6/30/10.
The new Housing Tax Credit should spur housing sales through the winter and spring. Normally, home purchases dwindle to a trickle during the winter months.
The housing tax credit not only extends the deadline for first time buyers, it also expands the eligibility criteria for first time buyers and offers a new tax credit for repeat homebuyers.
First Time Buyer Tax Credit:
The 1st time buyer tax credit is primarily an extension of the program that has been in place for purchases made between 1/1/09-11/30/09.
- First time buyers - defined as people who have not owned a primary residence in the last 3 years. For married couples, if either party has owned a primary residence in the last 3 yrs, then neither party may claim the tax credit. Buyers who have owned vacation or rental property still qualify as long as they have not owned a primary residence in the last 3 years.
- Maximum credit of $8,000 – the credit is equal to 10% of the purchase price, up to a maximum of $8,000. For buyers purchasing a property of $80,000 or more, they will receive the full $8,000. Buyers purchasing a lower priced property will get 10% (for example, a $50,000 house would result in a $5,000 tax credit)
- Partial credits - a partial credit is available for buyers with incomes up to $20,000 above the income limits (see information below on income limits). Partial credits are also available if unmarried individuals purchase a property together and only some of the buyers are eligible for the credit.
- Type of properties - any property that will be used as a primary residence qualifies. Properties can be new construction, resale, homes, condos, mobile homes and even houseboats. Properties can not be purchased from close family members (see IRS guidelines for excluded relatives).
However, significant changes were made to the tax credit program to expand the eligibility criteria and to close some loop holes which allowed people to take advantage of the system.
- Income maximums - For purchases made between 1/1/09-11/6/09, the maximum modified gross income is $75,000 for individuals and $150,000 for married couples (see your tax accountant for information on determining your MGI). Purchases made beginning 11/7/09 have increased income limits of $125,000 for individuals and $225,000 for married couples.
- Deadlines for purchase – The lower income guidelines apply to properties that closed by 11/6/09. The extended tax credit with the higher income limits requires a binding sales contract to have been signed by April 30, 2010 with a closing date no later than June 30, 2010 in order to qualify.
- Minimum age – buyers under the age of 18 and are claimed as a dependent on another person’s tax return are not eligible.
- Documentation required to get the tax credit - in order to claim the tax credit, buyers are now required to include a copy of the HUD closing settlement statement with the required IRS forms.
More information on the 1st time buyer tax credit…
Move-Up/Repeat Buyer Tax Credit:
In the prior tax credit program, only first time buyers were eligible for a housing tax credit. The new program provides a tax credit to many repeat buyers.
- Who is eligible – individuals who have owned and resided in a home for at least 5 consecutive years of the 8 years prior to the purchase date are eligible. For married couples, if either party is determined ineligible, then neither party may claim the tax credit.
- Maximum credit of $6,500 – the credit is equal to 10% of the purchase price, up to a maximum of $6,500. For buyers purchasing a property of $65,000 or more, they will receive the full $6,500. Buyers purchasing a lower priced property will get 10% (for example, a $50,000 house would result in a $5,000 tax credit)
- Partial credits - a partial credit is available for buyers with incomes up to $20,000 above the income limits (see information below on income limits). Partial credits are also available if unmarried individuals purchase a property together and only some of the buyers are eligible for the credit.
- Type of properties - any property priced at $800,000 or below and will be used as a primary residence qualifies. Properties can be new construction, resale, homes, condos, mobile homes and even houseboats. Properties can not be purchased from close family members (see IRS guidelines for excluded relatives).
- Income maximums - the income limit is $125,000 of modified gross income for individuals and $225,000 for married couples (see your tax accountant for information on determining your MGI).
- Deadlines for purchase - a binding sales contract must be signed by April 30, 2010 with a closing date no later than June 30, 2010 in order to qualify.
- Documentation required to get the tax credit - in order to claim the tax credit, buyers are required to include a copy of the HUD closing settlement statement with the required IRS forms.
More information on the repeat buyer tax credit…
The Tax Credit’s Impact:
The first time buyer tax credits that have been in effect since 2008 have definitely increased buyer demand for starter homes. As a result, homes and condos priced below $200,000 in the St. Louis region have been selling easily if they are priced appropriately for their location and condition.
However, sales of homes priced between $300,000 – $800,000 have been very slow for the last few years. The increased income limits along with providing a tax credit to repeat buyers should create some demand for these higher priced homes.
Normally, I would tell my clients who are selling a home in this price range not to expect a lot of showings during the winter and early spring months. Sometimes we even decide it is worth waiting to list their home until spring.
This year is different.
Since the tax credit is expiring in early spring, we may find more winter activity and a slower spring season.
If you are planning to sell your home in the next year, the time to list your home is now.
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PDF Possibly Related Posts:
- Missouri Property Tax Credit for Buyers
- Housing Tax Credit for 1st Time Buyers & Current Homeowners
- Missouri Residents can use the First Time Buyer Tax Credit at Closing to Cover Costs
- Housing Market Opportunity – $7,500 Tax Credit for Renters
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