As promised, as more information on and answers to questions about the newly extended/expanded Homebuyers Tax Credit Legislation becomes available, we’ll present for you both here and on The Money Show. Following is more such information.
Again, the income limits for the both the $8,000 first time homebuyer credit and the $6,500 so-called “move-up” credit have both been increased. Under the new law, individuals with incomes up to $125,000 and couples with incomes up to $225,000 now qualify fir the first time homebuyer or move-up tax credit. However, the $800,000 maximum cost of the home qualification rule remains the same.
Under the new “move-up portion of the legislation:
· You must sign a contract to purchase a new residence, by April 30, 2011, and close on that home by June 30t, 2010, and, again, begin immediately (or virtually immediately) use the new home as your primary residence.
· Under the move up portion of the law, you do not, however, need to sell your former primary residence. That property can be retained as an income or vacation property, and/or sold at some later date (again, so long as you immediately move into the new home and use it as your primary residence.) On the flip side, however, if you use the new home as a vacation home or an investment property, you will not qualify for the $6,500 credit.
· You must have used the former property as your primary residence for, out of the last eight years prior to closing, at least five consecutive years.
· You must use the move-up home as your new residence. However, while, as noted, there is a maximum cost, there is no minimum – buying a less expensive home is OK.
· The contract to purchase the new move up home must be signed on or after the date the new legislation went into effect (November 6, 2010), and, again, closed on by June 30, 2010. Unfortunately, move up homes contracted to purchase prior to this date won’t qualify.
· Depending on when you close on the new move home, you may take the credit on your 2009, 2010, or, in some instances, a revised 2008 tax return (best to speak with a CPA or tax attorney before deciding how/when to claim the credit). However, the IRS is charged with carefully checking the legitimacy of $6,500 move up credits (as well as $8,000 first time home buyer credits) due to the large number of fraudulent claims the Service has found on the $8,000 credit prior to the extension/expansion of the law. To file for either of the credits, you must fill out and file a form 5405 (provided by the IRS) and include a copy of the HUD Settlement Sheet from the purchase of the new home.
· The definition of a first time or move up home is quite liberal. Single, two and three family homes, condominiums, mobile homes, manufactured homes and, in some cases, even boat houses may qualify. Said properties can be newly constructed or existing properties. (Add-ons, even extensive add-ons, to properties you already own, however, do not qualify for the credit.)
· Under a number of exceptions, members of the military may have an additional twelve months – up until June 30, 2011 – to buy and move into a new property to qualify for the move up (or first time homebuyer) credit.
Finally, two additional words of advice. First, while anything is possible, it is highly unlikely this homebuyer credit legislation will be extended again. So, if you hope to take advantage of it, make sure you meet the April 30/June 30, 2010 deadlines (or, if you qualify under the military personnel exceptions, the June 30, 2011 deadline).
Second, as with all tax related legislation (not to mention the special attention the IRS is charged with paying here) remember that the newly extended/expanded first time homebuyer/move up homebuyer credit legislation can be quite complicated, and includes many specific requirements and exceptions. Accordingly, (again) as with all tax related issues, if you hope to take advantage of either the $8,000 or $6,500 credit, be sure to speak with and take the advice of a qualified CPA or tax attorney to be certain you qualify (preferably, before you begin your search for a new primary residence.)
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