Finally, some love for those who already own a house.
After passing and then reauthorizing a first-time homebuyers tax credit of $8,000, Congress approved a $6,500 tax credit for existing homeowners who perhaps want to move up to bigger or nicer digs.
The real estate industry expects this new tax credit to further boost the housing market -- adding to the substantial effect of the very popular $8,000 first-time homebuyers credit.
"I believe that [the $8,000] tax credit has been one of the more successful government programs," said Randy Morrow, a broker in the Arlington office of Keller Williams Realty. "And I strongly believe that this new tax credit will help spur home sales and further stabilize the housing market."
According to the Internal Revenue Service, these other restrictions also apply: >> The purchaser's modified adjusted gross income cannot exceed $125,000 for individuals and $225,000 for a couple filing jointly on their tax returns; >> The home's purchase price cannot exceed $800,000; >> The tax credit is equal to 10 percent of the purchase price up to $6,500; >> The purchase cannot be from a family member; >> The tax may have to be repaid if the property is sold or is no longer used as a principal residence in less than three years of the purchase; >> Contracts must be written between Nov. 7, 2009, and April 30, 2010, and must close by June 30, 2010.
Because of the recession, step-up or move-up buyers generally have been absent from the housing market, said Scott MacDonald, president of Re/Max Gateway in Chantilly. Step-up buyers disappeared, he said, because they lost equity in their own homes, are uncertain about housing prices amid foreclosures and short sales, and are anxious about unemployment and the economy.
"Our market has been primarily first-time buyers and investors," MacDonald said, "with a few relocation buyers and even fewer move-up buyers thrown into the mix."
Under the expanded federal guidelines, the new $6,500 tax credit is available to buyers who have owned or lived in a home for at least five consecutive years over the last eight years and meet certain income limits.
The tax credit is not available for the purchase of second homes, such as vacation properties, said Dan Rochon of Keller Williams Realty in Alexandria. There does not, however, appear to be any requirement that buyers immediately sell their first home. What they do have to do is make their new property their primary residence for at least three years. If tax credit buyers choose to hang on to their first home for a while -- perhaps rent it out until the market recovers -- that is fine.
Step-up buyers file for the tax credit when they file their federal taxes.
"The purchaser must attach documentation of the purchase to the tax return," Rochon said. "If you have already filed your income tax return, you can file an amended return and claim the credit."