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Home Buyers Tax Credit

The Greater Milwaukee Board of Realtors just released this informational piece about the tax credit. I have reproduced here, for you to read. Please call with any questions.

More on the Homebuyer Tax Credit Changes
How the New Homebuyers Tax Credit Works
from RealEstateEconomyWatch.com
by Steve Cook

The extension and expansion of the homebuyers tax credit that passed Congress November 5 allows more first-time buyers to qualify and creates an entirely new credit for existing homeowners who buy a new home.

The effective date is Tuesday, December 1 for the enhanced first-time buyer credit and for the new credit. It is not retroactive. However, first-time buyers who have been rushing the meet the November 30 deadline for the existing program need not worry. They can qualify under the new one. Existing homeowners who are also in the process of buying a home should consider delaying closing until December 1 or later to qualify for the credit.

Both credits expire next spring. Buyers must have a contract on a home before May 1, 2010 and they have until June 30, 2010 to close in order to qualify.

Key Provisions

Amounts:
- The first-buyer credit remains 10 percent of the cost of the home or $8ooo, whichever is less.
- The credit for existing homeowners is 10 percent of the value of the new home or $6500, whichever is less.

Definitions:
- A first-time homebuyer cannot have owned a home during the past three years.
- Existing homeowners must have owned and lived in their current home five out of the preceding eight years.
- Only principal residences qualify. No second homes or investment properties.

Income limits:
- The measure raises the income limits for those claiming the credit to $125,000 a year for individuals and $225,000 for couples, up from $75,000 and $150,000 in the previous first-time buyer credit. After that, the value of the credit phases out.
- The cost of the new home cannot exceed $800,000.

Cost:
- Expanding the home buyers’ credit will cost about $11 billion. The total cost of extending the first-time buyer credit and adding the existing owners’ credit is $16.7 billion.

How to Apply::
- Use IRS form 5405, which you file with an amended tax return.

Homebuyer Tax Credit

Here's the latest, as reported by the National Association of Realtors regarding the homebuyer tax credit:

As often happens, the Senate has gotten tangled in its own procedures, delaying a vote on the first-time homebuyer tax credit extension.

The shape of a final tax credit package has remained in flux since our first notification on Tuesday. As the media has reported this morning, however, there is an agreement on the details of an expanded and extended credit, but NO VOTE has yet occurred.

We cannot predict at this time when a vote will occur, but continue to press that it be as soon as possible.

The Extended and Expanded Tax Credit agreement includes the following provisions:

Amount: $8,000
Who: First-time homebuyers -- same definition as current law

Amount: $6500
Who: Repeat purchasers. Must have used previous home as a principal residence for 5 of the 8 previous years.

Income Limits: $125,000 for single filers/$225,000 for joint filers. Same for both first-time and repeat/move-up buyers

Limitation on cost
purchased home: $800,000

Time Frame: December 1, 2009 to April 30, 2010 plus 60 Day extension if binding contract is in place by April 30, 2010

Anti-fraud measures have been added.

NAR will be monitoring the progress and any potential changes to the bill. NAR will send out a notice when a vote has occurred.

Call with any questions, and spread the word.