Here are some of the most frequently asked questions about the changes to the Homebuyer Tax Credit:
Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. For example, individuals who downsize or move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.
Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I closed on November 20th. Since President Obama signed the bill before I closed, will I qualify for the new $6500 tax credit?
Answer: Yes. The new income limitations went into effect as soon as the President signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the closing date. Since the new rules were signed prior to your closing, you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range.)
Question: I am a first-time home-buyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. Will I be eligible for a credit?
Answer: Yes. The new income limitations went into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the closing date. So you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range).
Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.
Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did in the last 3 years doesn’t impact eligibility.
Question: I am an eligible first-time home-buyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
Answer: You do not have to close before December 1. Once the legislation was signed, it made it as if the Nov 30 date had never existed. Therefore, so long as the contract closes before July 1, the purchaser will be eligible for the credit.