Just last week I blogged about how the first time buyer tax credit was set to expire on November 30, 2009. Well, a lot has happened in the past week. Earlier in the week the House of Representatives passed an extension. And Barack Obama signed it into law early on Friday.
The extension now runs through June. In order to take advantage of the tax credit up to $8,000, you will need to sign a contract by April 30, 2010 and close by June 30, 2010. Just be careful. If you are signing a contract to purchase a home that is going through a short sale, please beware. A lot of banks can take longer than 60 days to approve a short sale or that closing. So you’ll need to get everything signed prior to April 30. April 30 is the last day you can have a contract signed and June 30 is the last possible day to close to take advantage.
Again, how the credit works is this. If you purchase a home for $80,000 or more, you are eligible for an $8,000 tax credit on your 2009 taxes. Remember, you file 2009 taxes in 2010. If it’s a home for less than $80,000, you can get a credit for up to 10% of the purchase price. If the home is $59,000, you will receive $5,900.
Obama also extended the income limits of who is eligible. Single buyers can now earn up to $125,000 per year in income and married couples up to $225,000 to be able to receive it. If your income level is above those amounts, you are not eligible to receive the credit.
Obama also extended the credit to move-up buyers, not just first time buyers. In order to qualify for this $6,500 credit, you must have owned and occupied a principal residence for at least 5 of the last 8 years. So many more people will qualify under the new rules. Congress and the President are hoping the economy will get stimulated a bit by this expansion.
Originally, Congress was hoping that this tax credit would start a domino-like reaction. First time buyers would purchase homes from sellers who would then choose to purchase homes and so on. Unfortunately, a lot of buyers turned to vacant/foreclosed/short sales, so these homes didn’t have sellers who needed to move up. But they’re hoping that offering a tax credit to move-up buyers will start this domino effect again.