There is quite a bit of confusion on the new rules of the tax credit that passed on Friday. Here are the most frequently asked questions...
Q: Existing homeowner credit: Must the new house cost more than the old house?
A: NO, as long as you meet all the eligibility requirements you can still get the $6500. credit.
Q: I'm an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home more than five years and I'm within the new income limits. I will go to settlement on November 20th. If President Obama has signed the bill by the time I go to settlement, will I qualify for the $6500. credit?
A: Yes, the existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.
Q: I am a first time homebuyer but was not within the prior income limits at the time I entered the contract on October 20 2009. I will be covered however by the new limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for the credit?
A: Yes, the new income limitations go into effect as soon as the president signs the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, or settlement date. So if the new rules have been signed when you go into settlement, you should be eligible for the credit (or a portion of the credit if your within the phase-out range).
Q: I am an existing eligible homeowner. I have a fair amount of equity in my home. I have found a home with a non-negotiable price of $825,000. Will I be able to use any of the $6500. tax credit?
A: No, the $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any purchase of the credit.
Q: I owned my home for 10 years, but sold it two years ago and have been renting since. If I purchase a home will I be eligible for the $6500. credit if I meet all other requirements?
A: Yes, because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500. credit. For example, if John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The key word here is "consecutive" . As long as he lived in that house for 5 years straight what he did the last 3 years does not impact eligibility.
Q: I'm an eligible first time home buyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1, 2009? How does the extension date effect me?
A: You do not have to close before December 1, 2009. Once the legislation has been signed, it will be as if the November 30th date had never existed. Therefore, as long as the contract settles before April 30, 2010, the purchaser would be eligible.
If you have other questions that your not sure about please call us, we would love to help!
