$8,000 homebuyers tax credit extended
President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday.
The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June. Homebuyers must sign a contract before April 30 and close by June 30. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.
The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers — those who have not owned a home in the past three years — still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.
“The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules,” said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.
Who qualifies?
Nicholas provided four scenarios illustrating how the tax credit rules for existing homebuyers will apply:
• Harry owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.
• Sue purchased a home in 2004 and has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.
• Jane purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.
• Mark purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.
How it helps the economy
Legislators and industry experts expect that the credit will encourage buyers such as Jane and Sue to move up their purchase plans.
“This bill will shift demand from the second half of 2010 into the first half,” said Pat Newport, a real estate analyst with IHS Global Research. “As a result, home sales and prices will get a boost in the first half of 2010, with payback in the second.”
That’s not a bad thing, according to Bill Kilmer, vice president of advocacy for the National Association of Home Builders. It’s important to stabilize real estate markets quickly to help bring the economy out of its tailspin.
The original $8,000 tax credit appears to have helped accomplish that goal: Home prices have inched up the past few months, according to the S&P/Case-Shiller Home Price Index.
[source: cnnmoney.com]
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