By Stephen J. Ryan, Esq.
MAR General Counsel
Four Things REALTORS® and Consumers Need to Know About the NEW EXPANDED 2009/2010 Homebuyer Tax Credit Extension —EFFECTIVE IMMEDIATELY!1. Who are eligible homebuyers? Has eligibility been expanded to include existing homeowners?
Eligible homebuyers now come in two categories: the first-time homebuyer, a person who has not owned a principal residence in the past three years (subject to income restrictions); and a long-time resident of the same principal residence, someone who has owned and occupied a home as the principal residence for any consecutive five-year period during the last eight years (subject to the new income ceilings). You do not have to sell your existing home to get the credit (you can keep it or sell it), but you must make your new home your principal residence for at least the next three years to avoid penalty.
Finally, the date of purchase has been extended to April 30, 2010, meaning a binding P&S agreement is executed by April 30, with a closing date of no later than July 1, 2010. It is estimated that seven out of 10 current homeowners qualify. We have been advised by NAR not to expect any further extensions of the tax credit program beyond the dates above.2. What are the new maximum income levels?
Much higher than before. For fi rst-time homebuyers the Modified Adjusted Gross Income limit is now $125k for singles and $225k for couples. For long-time residents of the same principal residence the limits are the same.3. Has the credit amount been increased?
No. But the maximum credit amount is different depending on whether the taxpayer is a fi rst-time homebuyer or a non-first-time homebuyer. For
first-time homebuyers the full credit is still $8,000 ($4,000 if married filing separately). For long-time residents of same principal residence the full credit is $6,500 ($3,250 if married filing separately).
The homebuyer will get this money in the form of a federal tax refund, just as before. Also, though it is still a true credit as opposed to a loan (recall the 2008 version), recapture or repayment would still be required if you sold your home within 36 months of purchase.4. What housing qualifies as a principal residence purchase?
As before, single-family homes, condos, townhouses, and co-ops qualify so long as they are used as the taxpayer’s principal residence. A new IRS
Q&A states that multi-family properties qualify for the credit; the amount is based upon the value of the unit that will be the principal residence and not the entire building. For example, with a $130K two-family, the credit is only based upon the value of one of the two units or $65k, 10% of which is $6,500. As with the previous rules, sales between immediate family
members are ineligible. It is also important to note that the purchase price of the home cannot exceed $800k.
There are numerous other provisions in the new credit that homebuyers should clearly understand before they make any decision regarding their
eligibility. Please review more detailed information, including a new MAR-produced webinar with PowerPoint that can be used at sales meetings at marealtor.com