UPDATE:(11/9/09) The new $6,500 tax credit for trade up buyers is effective as of the day the bill was signed, November 6, 2009, according to Sen. Isakson’s office.
Since Senate negotiators announced they had reached an agreement on extending and slightly expanding the $8,000 first-time home buyer tax credit, my inbox has been filling up with questions about the credit and who will qualify for it. I’m also getting lots of comments from people irritated that they purchased this past year and would have qualified but now get nothing.
This week, the Senate voted 98 to 0 to extend and expand the tax credit. Here’s a sample of the questions I’ve received:
Q: Love your advice column. When is the compromise bill going up for vote? We could sure use the $6500 credit.
A: The vote happened this week. Senator Johnny Isakson (R-Ga.) was able to attach his legislation as an amendment to S.1699, the Unemployment Compensation Extension Act of 2009.
Since the current $8000 first-time home buyer tax credit expires on November 30, 2009, real estate industry professionals felt it would be helpful to know the extension and expansion is in place before then. If people believe the tax credit is coming, but don’t know when, they might push back their closing, or decide not to bother shopping for a home at all. At least that’s what real estate agents think.
The question for the real estate industry now is whether pushing the tax credit expiration date back to April 30, 2010 (if you have a completed contract you have to close by June 30, 2010) will give buyers the impetus they need to purchase a home sooner rather than later.
Q: When my husband and I married in 2007, he owned a home in which I lived, but my name was never put on the deed. In July 2009, a mobile home was purchased and the title is in my name. Do I still qualify as a “first time home owner”? I have not owned a home in the last 3 years.
A: Do you own the land on which the mobile home sits? Is it permanently attached? Is it titled as real estate or a vehicle. The answer to your question depends in part on how you answer my questions.
As far as buying a home because your home isn’t in your name, the answer is no. The IRS means test treats a husband and wife as one unit, even if one spouse has never owned property.
The rule states, if either spouse owned a house in the last three years, both are disqualified from claiming the tax credit. But under the new proposed rules, if you lived in the home for at least five years, then you might qualify. Full rules for the current law are on my site or at the IRS.gov.
If you decide to purchase another home after December 1, 2009, then you might qualify for the trade-up $6500 tax credit, provided you don’t earn more than $225,000 as a married couple (or up to $125,000 as an individual) and you lived in your previous home for five years.
Q: I closed earlier this year on my first home, but I didn’t get the full amount of the tax credit. It was only $6,300 because I earned more than the current $75,000 income limit. But now that the income limit is being raised to $125,000 for an individual, I’d qualify for the whole $8000 tax credit.
Can I reapply for the tax credit?
A: Nope. The new rules only apply to purchases that close after December 1, 2009. You have to think of this version of the $8000 first time home buyer tax credit and $6,500 trade-up buyer tax credit as entirely new tax credits that have nothing to do with whatever came before.
If you closed before November 30, 2009, you were stuck with the lower income limits. But hey, that’s $6,300 that you don’t have to pay back – unlike everyone who applied for the tax credit in 2008. Those first-time home buyers are stuck paying back a $7,500 tax credit at the rate of $500 per year for 15 years.
Q: I need your urgent feedback. I’m preparing to close on a house on November 10, 2009. If the new tax credit legislation passes, would I qualify for the $6500 credit? If not, I am going to need to postpone my closing somehow.
A: If you’re a first-time buyer, you’re good to go. But if you’re a trade-up buyer, you’ll need to push your closing back to December 1, 2009 or later in order to qualify. Anyone who closes before December 1, 2009, who is a trade-up buyer, will not qualify for the tax credit.
UPDATE: (11/9/09) The new $6,500 tax credit for trade up buyers is effective as of the day the bill was signed, November 6, 2009, according to Sen. Isakson’s office.
Q: Will the tax credit for move up buyers be retroactive? My wife and I sold our house of ten years in June 2009 and bought a new house in July. Would we qualify for the tax credit if we meet all other income requirements?
A: No. Unfortunately, the tax credit is not retroactive. Sorry.
Q: I own a double-wide “trailer” home in Florida. I do not own the land and it has not been titled “real estate.” I buy county license tax stickers. I rent the land even though it is affixed to the ground by water, sewer, electric, etc.
I have lived only here for 20 years and am looking at buying a home that would be my main residence. Do I qualify for the stimulus “first time homebuyer” incentive of 10 percent of the purchase price or $8,000 whichever is lower? Thanks.
A: If you do not own the land, and the property is titled as personal property, or a vehicle, I believe that your trailer is not considered a home. Some mobile homes are considered to be real estate, but typically that is when you also own the land. So, barring some other quirk of information that you did not include in your email, you should be able to use the credit.
You might need to make sure that the IRS considers your trailer to be personal property. Have you taken any tax benefits on your federal income taxes for the trailer, such as a home interest deduction or other tax deductions?
If the IRS considers the trailer to be personal property, you should be able to take advantage of the tax credit.
Now that the Senate has passed the new tax credits, as long as you earn less than $125,000 if single and $225,000 if married, you have until April 30, 2010 to find a property and finalize a contract to qualify.
Read the details of what is included in the new tax credit legislation at http://www.thinkglink.com/article/2009/10/29/8000-first-time-home-buyer-tax-credit-to-be-extended-and-expanded.