The extension and expansion of the first time homebuyer tax credit is going to the President’s desk for signature as part of H.R. 3548 – The Worker,Homeownership, and Business Assistance Act of 2009.
The Engrossed Amendment as Agreed to by the Senate is the only available version of this bill that I’ve been able to find online.
Most of what is in here I have written about previously and there are several things that I have not, so let’s take a closer look at some of the changes and expansions for the homebuyer tax credit.
SEC 11. EXTENSION AND MODIFICATION OF FIRST-TIME HOMEBUYER TAX CREDIT – Excerpts & Explanations
(a) Extension of Application Period-
(1) IN GENERAL- Subsection (h) of section 36 of the Internal Revenue Code of 1986 is amended–
(A) by striking `December 1, 2009′ and inserting `May 1, 2010′,
In English: Must purchase before May 1st, 2010 – which is government speak for you have to close on or before April 20th, 2010.
(2) EXCEPTION IN CASE OF BINDING CONTRACT- In the case of any taxpayer who enters into a written binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2010, paragraph (1) shall be applied by substituting `July 1, 2010′ for `May 1, 2010′.’.
In English: If you are in escrow (purchase offer accepted by both buyer and seller) on or before April 30th, 2010 you must close escrow (complete the purchase) no later than June 30th, 2010 and you can still claim the full credit that you are qualified for.
(g) Election To Treat Purchase in Prior Year- In the case of a purchase of a principal residence after December 31, 2008, a taxpayer may elect to treat such purchase as made on December 31 of the calendar year preceding such purchase for purposes of this section (other than subsections (c), (f)(4)(D), and (h)).’.
In English: You may file an emended, previous year tax return to claim the credit. Example: If you purchase a home before January 1st 2010, you may file an amended 2008 tax return or claim it on your 2009 next quarter.
If you purchase your home in 2010, after you have filed your 2009 tax returns, you may file an amended 2009 return to claim the tax credit.
(b) Special Rule for Long-time Residents of Same Principal Residence- Subsection (c) of section 36 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
(6) EXCEPTION FOR LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE- In the case of an individual (and, if married, such individual’s spouse) who has owned and used the same residence as such individual’s principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence.’.
In English: Ok, now this I find curious. This section refers to previous homeowners qualifying for the tax credit. I see no mention of a previous homeowner having to “buy up”, which seemed to me like a term that is way too open to interpretation.
In order to qualify for the $6,500 credit you must have lived in a principle residence (as claimed on your tax returns) for five consecutive years out of the last eight years.
So, here’s a scenario I would like to get clarification on: If you bought a principle residence 8 years ago and sold it 2 years ago, and you are buying a home now…..you’re eligible? I think the answer is Yes.
Now, based on how this is written, this scenario would NOT be eligible: You bought a principle residence 8 years ago and sold it 2 years ago – you purchased a new home 2 years ago and now want to move “up” to a better principle residence.
It sounds like you have to have lived in the last principle residence you owned (renting doesn’t count) for a minimum of 5 consecutive years, even if you’ve sold it and have been renting.
Remember, you are considered a first time homebuyer and are eligible for the $8,000 credit if you have not owned a principle residence in the past 3 years.
I’m sure you will have questions. I still have questions. But I think I understand this the way it’s presented here.
(c) Modification of Dollar and Income Limitations-
(1) DOLLAR LIMITATION- Subsection (b)(1) of section 36 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
(D) SPECIAL RULE FOR LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE- In the case of a taxpayer to whom a credit under subsection (a) is allowed by reason of subsection (c)(6), subparagraphs (A), (B), and (C) shall be applied by substituting `$6,500′ for `$8,000′ and `$3,250′ for `$4,000′.’.
(2) INCOME LIMITATION- Subsection (b)(2)(A)(i)(II) of section 36 of such Code is amended by striking `$75,000 ($150,000′ and inserting `$125,000 ($225,000′.
(d) Limitation on Purchase Price of Residence- Subsection (b) of section 36 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
(3) LIMITATION BASED ON PURCHASE PRICE- No credit shall be allowed under subsection (a) for the purchase of any residence if the purchase price of such residence exceeds $800,000.’.
In English: There are 3 parts to this section.
First part: Previous homeowners can claim $6,500 instead of $8,000 (for tax payers filing joint or single) and $3,250 or $4,000 (if married filing separate)
Second part: Income limits have been raised from $75,000 for single tax payer and $150,000 for joint to $125,000 for single and $225,000 for joint.
Third part: Maximum purchase price of any qualifying single family residence is $800,000 .
(f) Extension of First-time Homebuyer Credit for Individuals on Qualified Official Extended Duty Outside the United States-
(1) IN GENERAL- Subsection (h) of section 36 of the Internal Revenue Code of 1986, as amended by subsection (a), is amended by adding at the end the following:
(3) SPECIAL RULE FOR INDIVIDUALS ON QUALIFIED OFFICIAL EXTENDED DUTY OUTSIDE THE UNITED STATES- In the case of any individual who serves on qualified official extended duty service (as defined in section 121(d)(9)(C)(i)) outside the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010, and, if married, such individual’s spouse–
(A) paragraphs (1) and (2) shall each be applied by substituting `May 1, 2011′ for `May 1, 2010′, and
(B) paragraph (2) shall be applied by substituting `July 1, 2011′ for `July 1, 2010′.’.
In English: I have not previously written about this and I apologize. There is a special extension for any qualified extended duty armed forces (military, foreign services, intelligence) serving out of Country.
If a person is out of Country on official government duty for at least 90 days during the period after December 31st, 2008, and before May 1st, 2010 – They or their spouse will be eligible for the tax credit extended until the same dates (in Contract on or before April 30th, close on or before June 30th) of the year 2011.
Ok, that’s what i’ve got for this update. I will take another look at the final bill once it’s become law and report anything new.
I said it before and I’ll say it again – If you plan on taking advantage of this credit you have to start NOW. It’s very, very competitive out there and time flies, especially when you’ve got the holidays coming up. Get approved for financing, interview and hire your Team (Lender & Agent) and get the process started.
All indications are that this is going to be the very last extension of this credit – this is a very expensive program for tax payers and there is a lot of opposition even now.
Other articles about this topic that might interest you:
- HR 2801: Home Ownership Moves the Economy Act of 2009 – Homebuyer Tax Credit Revision We have a little bit more news about the efforts to revise and extend the Homebuyer tax credit. Let’s take...
- UPDATE: Homebuyer Tax Credit, Unemployment Bill Advances in Senate So far, I’m not eating any crow. There have been no reports about changes to the Homebuyer Tax Credit, it...
- No More Extensions for $8,000 Tax Credit As the deadline for the latest extension of the $8,000 homebuyer tax credit quickly approaches, lawmakers are pretty clear about...
Chris "Doc" Apodaca
Jeff Brown – BawldGuy
Scott Schang
{ 8 comments… read them below or add one }
So to your example on $6500 credit. My scenario. I bought a home as my primary residence in 12/1/2003 then transfered the title to my parents 2/1/2009 since i had moved to California. Since I had filed taxes at that address 5 consecutive years before moving and still within the 8 years will I qualify on my new home purchase now for the $6500. I think that I might.
Thanks for all the great information you give us on this site all the time.
Much appreciated.
Jayson
Not understanding this! $6500 for homeowners who have been in their homes for at least five years? Where is the stimulus in that? What about those of us who have had a house in the last three years (do not qualify as a first time homeowner) and now need to buy. Shouldn’t there be a helpful hand for us?
Jayson, the way I understand the wording of the bill, I’m going to say Yes!
John,
Personally, I don’t like the fact that the government is giving these types of tax credits period. The government is passing the buck to future generations with the tax income deficits that are being created with some of these programs. The homebuyer tax credit alone will cost tax payers 10 billion over the next six months.
Don’t be surprised when you hear that income taxes have to be raised for the greater good of the Country!
I hear ya though, how do they decide who gets how much and why? It’s pretty simple. Lobbyists. Who has the biggest pockets and the ears of the law makers wins.
Hi Scott,
We sold in February of 2008 after living in the home for 10 plus years and then bought a new home in July of 2009. From what you have indicated above we fall within the other listed parameters…can we take advantage of the credit? Mike
Hi Mike,
I have to read the final text of the bill but I don’t believe you would qualify. The reason is that this expansion is not likely to be retroactive, which means you would have had to close escrow on your new home after the new law is in place, which it is not. The President is set to sign HR 3548 either tomorrow or early next week.
I will certainly post more details once the full text of the bill is released.
Ok here is my story.
I purchased a principal residence on 11/2001 then sold it 6/2004
I then purchased another principal resicence on 8/2005 sold it 1/2006
I then purchased another principal residence on 7/2006 then sold it 9/2007
Got divorced so I have been renting until now.
I know I don’t qualify for the 8K new buyers credit but what about the new $6500 credit?
Hi Tim,
The President should sign HR 3548 either tomorrow or early next week. Once he does I imagine shortly thereafter the final text of the law will be public. Let me get my hands on the final version before I answer that with any degree of accuracy. It seems like the way the bill reads now, you have to have been in your previous home for 5 years. It makes sense though that the criteria should read that if you have owned a principle residence for 5 years (even if it was multiple homes).
I’ll be sure to let you know in a few days when the final text is published. I’ll go through it like I did today and try to make heads or tails of it.