Finally, Stimulus Money for You, too

by Tom Tousignant

in Blog, Home Buying, Mortgages

On Nov 6th, the President signed an extension of the First Time Home Buyer’s $8,000 tax credit and added a new benefit – a $6500 Tax Credit for homeowners that are buying a new primary residence between Nov 6th and May 1st.

Here are the highlights of the $8,000 tax credit for first time buyers:

  • Who:  Someone who has not owned a principal residence during the three-year period prior to the purchase, who earns less than:

-From Jan 1, 2009 through Nov 5th, 2009:  $75,000 Filing Single or $150,000 Married, Filing Jointly
-After Jan 6th, the income limits are increased to $125,000 Filing Single or $225,000 Married, Filing Jointly

  • How Much:   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.  The tax credit applies only to homes priced at $800,000 or less.
  • When: The closing of the sale has to occur between January 1, 2009 and June 30, 2010, however, a binding purchase contract has to be signed by April 30th, 2010
  • How:  Add IRS form 5405 to your tax return.  You can file an amended return, or wait until next spring when you regularly file.
  • Why:  Great question.  Congress has decided that this tax credit will help stabilize home prices. Since you will probably put the money to better use than the government, you may as well take advantage of it.

So, this extension takes the heat off a lot of home buyers who were nervous about closing by November 30th.  but what about those people who are still renting and not sure if they should buy?  I wrote a blog post about that a few months ago, titled “Young Couple Should Rent“.

New $6500 Tax Credit for homeowners that are buying a new primary residence

This tax credit is virtually the same as the First Time Homebuyer Tax Credit, except:

  • It’s only $6,500 of free money
  • You have to have lived in your previous house for 5 of the previous 8 years.  You have to have been in the same house for 5 of 8 years, not just been a homeowner for 5 of 8 years.

Members of the Armed Forces, military intelligence and Foreign Service who are on extended overseas duty or who have been on active duty for more than 90 days in 2008 and 2009 have another year to use the tax credit (through June, 30, 2011)

Don’t forget another $1500 in the Energy tax credit, so when you get into your new house, look at the list of items here that also qualify for the Energy tax credit.  With this, a home buyer can increase the tax incentives for buying a home to $9,500 for first timers, or $8,000 total for previous home owners who move.

Visit the IRS Website for the latest information.  It’s interesting that earlier this year, Congress was considering eliminating the home mortgage tax deduction and now they have decided that tax credits for home buying makes more sense.

Will this extension of the tax credit or the new tax credit make you want to buy a home?

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