The NEW IMPROVED Home Buyer’s Tax Credit

On November 6th the President signed a bill passed by the US Senate and House of Representatives extending the current First Time Home Buyers Tax Credit AND creating a tax credit for 2nd time and subsequent primary residence purchasers. The First Time Home Buyer credit has not changed except to be extended through the end of April 2010. Any home buyer qualified under this program and is under contract to buy a home by the end of April; closing by the end of June will be able to receive an $8,000 credit from the government.

The First Time Home Buyer Tax Credit in particular has really help stabilize our area home prices which fall into the typical First Time Home Buyer segment. For example, before the tax credit had been set at an $8,000 credit vs. the previous $7,500 government loan we had been seeing nearly a years worth of inventory in our market in the $100,000-$250,000 price range. That means that if the same number of buyers kept purchasing homes it would have take a year to sale every home in that market segment. That is assume no more homes came on the market, of course. At the end of October 2009 we see that segment at about 7 months of inventory which is very close to having a balanced market.

The NEW tax credit is for 2nd time and subsequent purchases available to individuals and couples who are buying a primary residence to replace the one they currently own. If you have lived in your current primary residence for 5 of the last 8 years and you meet the income limits you would be qualified to receive a $6,500 credit for a couple or $3,500 for an individual. The signing date of November 6th 2009 is significant because any qualified purchase after that date can file for the credit.

One interesting note is that the bill doesn’t seem to say you can’t rent your current home and then buy the new primary residence thereby waiting for a little better time to sale that home. There would be some tax consideration for doing or not doing this but it may be something to consider if you think you may want to be an investment property owner for a little while.

Also of interest, this is truly a CREDIT not a tax deduction. For example if you are due $1,000 back on your taxes at the end of the year and you qualified for the $6,500 credit, you would then receive a check for $7,500.

There are Income limits and home purchase limits with both of these credits. Both are fairly generous. You can not make over $125,000 Single, and $225,000 as a Married couple. The home purchase can not be over $800,000.

For additional information on this credit we have created a side by side comparison for you. Please do not hesitate to contact me if you have additional questions.

Todd Long
Broker-In-Charge
Coldwell Banker United Realtors
todd.long @ cbunited.com