Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6,500 credit.
Question: I am an existing homeowner. On October 25, 2009 I signed a contract to purchase a new home. I have lived in my current home for more than five consecutive years and am within the new income limits. I will go to settlement on November 20. Will I qualify for the new $6,500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (November 9, 2009). 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.
Question: I am a first-time home buyer, but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
Answer: Yes. The new income limitations went into effect today, November 9, 2009. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed. So if you settle after today, you should be eligible for the credit (or a portion of the credit if you’re within the phase-out range).
Question: I am an eligible existing 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 $6,500 tax credit?
Answer: 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 portion of the credit. The $800,000 is an absolute ceiling.
Question: I owned my home for ten years, but sold it two years ago and have been renting since. If I purchase a home, will I be eligible for the $6,500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than five consecutive years of the previous eight, you will qualify for the $6,500 credit. For example, say 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 five consecutive years out of the last eight years. The key word here is “consecutive.” As long as he lived in that house for five years straight what he did in the last three years does not impact his eligibility.
Question: I am 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? How does the extension date affect me?
Answer: You do not have to close before December 1st. Once the legislation has been signed, it is as if the November 30th date had never existed. Therefore, so long as the contract settles before April 30, 2010 (or July 1, 2010, worst case), the purchaser will be eligible for the credit.
This information was adapted from information distributed today by the National Association of REALTORS® Government Affairs Division.