With interest rates at an historic low, many are considering purchasing a first home or changing residences. Legislative amendments in November, 2009 extended and expanded the first-time home buyer credit. The expansion will be funded from bill (H.R.3548) and the $787 billion stimulus originally approved in February, 2009.
The $8,000 home buyers’ tax credit, originally enacted in 2009, is now set to expire April 30, 2010. First-time home buyers who have a purchase agreement by April 30, 2010 (with closing to take place before July 1, 2010) are eligible to receive the credit. To qualify as a first-time home buyer, the purchaser may not have owned a residence in the three years prior to the purchase.
Current homeowners who are looking for a new home could also qualify for a $6,500 credit if they have lived in their existing primary residence for at least five years. Homes costing more than $800,000 are not eligible for the credit, and buyers must be over 18 years old to claim the credit. Any buyer claiming the tax credit who, within three years, sells their new home or stops using it as their main residence, would have to repay the credit.
The home buyers’ credit is available to individuals with a modified adjusted gross income of up to $125,000, or $250,000 for couples, an increase from $75,000 for individuals and $150,000 for couples under the original rules. The higher income limits are only for homes purchased after Nov. 6, 2009. This extended credit can be applied to primary residences including single-family homes, condos, townhomes, and co-ops.
Lawmakers believe that this expansion of the credit, especially to those who are already homeowners, will help create jobs, as the tax credit makes people more likely—and financially able—to make home improvements and purchase items that are necessary for a first or new home. The Treasury Department estimates that more than 1.4 million Americans have taken advantage of the home buyer credit so far, at a cost of about $10 billion.