Home Buyer Tax Credit Official

The home buyer tax credit bill that was recently passed by both the House of Representatives and the Senate has been signed by President Obama and is now official. Given the dissension in the House and Senate over so many other things, the bill slid through relatively easily. The Senate vote was a stunning unanimous vote of 98 in favor to 0 opposed. And the President didn’t delay signing to the bill to make it official.

How will this tax credit bill affect home sales, and what exactly does it do?

The current home buyer tax credit can be as high as $8,000 on the purchase of a home by a first time buyer. The credit allows for 10% of the purchase price, up to $8,000. That credit has been extended and is now good through April 30, 2010. As long as a contract is signed and closed before July 1, 2010, the buyer can claim the credit. For members of the Armed Forces who have been deployed outside the U.S. for at least 90 days at some point between Dec 31, 2008, and the cut-off date for the credit (May 1, 2010), the dates that end the period where they can claim the credit are extended to May 1 and July 1, 2011.

A change to the home buyer tax credit over the current credit is a new bonus for people who have lived in their previous residence for 5 years or more. Anyone who has lived in the same home for 5 consecutive years during the 8 years before the purchase of their next home will be treated as if they’re a first-time home buyer and allowed a credit, though a slightly smaller one than a true first time buyer. These buyers can get up to 10% of the purchase price of their new home, but only up to $6,500.

So now not only will first buyers have added incentive to purchase within the next several months, but people who’ve been in one residence for 5 years or more anytime during the previous 8 years will have a $6,500 incentive to go ahead and make that change.

Another change to the home buyer tax credit is the income cap. Before this bill was signed, a single person could only claim the credit if they made less than $75,000 a year, and a married couple could only claim it if their income was less than $150,000 yearly. Those limits have been raised to extend the credit to more people. Now, single people can make up to $125,000 and married couples can bring in a combined $225,000, and still take the $8,000 first time home buyer tax credit.

This credit still applies only to a primary residence, and can’t be claimed for a second home or investment property. And it also can’t be applied to any residence that sells for over $800,000. The first time home buyer tax credit has also been improved with advanced fraud protection, like clear rules on how to claim the credit with the proper paperwork, and a minimum age of 18 to claim it.

About the Author

For more information on the tax credit and to learn how to benefit in today’s market visit http://www.tylerfreed.com.

Seattle Real Estate Tyler Freed