Family Finances: Homebuyers Get a Bigger Break
By Mary Beth Franklin,
Source: Your Money Kiplinger
The homebuyer tax credit isn't just for first-timers anymore. Congress opened the door to existing homeowners who want to buy a new home and agreed to raise the income-eligibility limits so that more people could take advantage of the popular tax break. Plus, lawmakers extended the first-time-buyer credit, which was due to expire Nov. 30, through the spring.
To qualify for a tax credit, eligible homebuyers have until April 30, 2010, to sign a binding contract, and they must close the deal before July 1. First-time buyers, defined as purchasers who have not owned a home in the previous three years, can claim a tax credit for 10 percent of the value of the house, up to a maximum of $8,000. And now those who have owned a house for at least five consecutive years out of the past eight and who are in the market for a new one may be eligible for a tax credit of up to $6,500.
Income-eligibility limits for both credits are higher than the caps that applied to the earlier first-time-buyer credit. For single taxpayers and heads of household, the credit begins to phase out at $125,000 of income and disappears at $145,000. For married couples, the credit starts to phase out at $225,000 and disappears at $245,000.
The credit applies only to primary residences, not second homes, and the property value may not exceed $800,000. Members of the military serving outside the U.S. for at least 90 days can take advantage of the credit until June 30, 2011.
First-time home buyers who closed on their homes before Nov. 7 are restricted to lower income thresholds of $75,000 (phasing out at $95,000) for individuals and $150,000 (disappearing at $170,000) for married couples. Existing homeowners who closed the deals on their new homes before Nov. 7 are out of luck.
If you close on your home by Dec. 31, 2009, you can file an amended 2008 tax return (Form 1040X) for an immediate tax refund. If you close the deal between January 1 and April 15, 2010, you can claim the credit on your 2009 return. For later sales, file an amended 2009 return.
(Mary Beth Franklin is a senior editor at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. Visit www.kiplinger.com for additional advice and features.)