Even though it's taken a back seat to the original $8,000 credit for first-time home buyers; the new $6,500 federal tax credit, nick-named the "move-up" tax credit, for returning home buyers that passed the House and the Senate a couple of weeks ago and extends to June 30th 2010 just might be perfect for you.
You might fit the criteria that's needed to qualify for it and if you are considering buying another home in the first half of the coming year then you will need to know how it works and when it will be available.
First, the good news. The new tax credit is available right now because it went into effect on November 6th. Therefore, if you fit the key criteria that includes that you've owned and lived in your current home for a consecutive five years out of the last eight, and your adjusted household income does not exceed $125,000 if you file taxes singly or $225,000 should you file married and jointly then you can claim the credit when you close on a qualifying house.
Despite its nick name the "move-up" tax credit, there is no requirement that a home buyer needs to buy "up". In fact, homeowners can even downsize to a smaller home.
Listed below are some of the key features you need to know about the $6,500 credit:
- The new house cannot cost more than $800,000.
- The new home must be your primary residence.
- You do not have to sell your current home. Therefore, you can rent it out, turn it into your second home or sell it later in 2010 hopefully when home prices have risen higher. However, if you plan to keep it, you must be sure that you move into your new home almost immediately after you close escrow so there's no question it was your main residence at that time.
- There are a variety of different types of homes you can purchase using the new tax credit. They are; new or pre-owned single-family homes, condos, manufactured homes and mobile homes. It can even be a boat as long as it functions as your primary residence. However, you cannot use the credit if you are buying a second home or an investment property.
- The IRS has been instructed by Congress to scrutinize every claim for the tax credit particularly more closely in the coming months than it did earlier this year because federal investigators found and documented many instances of fraud from the $8000 federal tax credit.
- There are revised rules that require taxpayers to submit copies of their settlement statements (HUD-1 forms), along with their requests for the tax credit using IRS Form 5405. Congress has enacted new rules that prohibit people under the age of 18 or those who are counted as dependents on another taxpayer's filings from claiming the credit.
- People who buy in 2009 who close escrow after November 6th and no later than December 31st of this year can claim the $6,500 credit on their 2009 federal tax returns, or on their amended 2008 returns. Furthermore, eligible buyers in 2010 will be able to file for the tax credit on their 2009 returns or their 2010 returns, but you should discuss it with your tax advisor.
Please note that if you are not sure if you can close by the deadlines established for the new credit then you should not assume that Congress will vote for another extension. More than likely they will not vote for an extension because all the political and budgetary signs show that that's very unlikely. You shouldn't risk it.
For further information regarding both the $8000 and the $6500 federal tax credits please visit www.federalhousingtaxcredit.com, which sponsored by the National Associations of Home Builders.
This article is for informational purposes only. Individuals should consult with qualified professionals on each individual's particular situation. This article should not be construed as legal advice.