With the drop in property values, there are more than a few buyers who are “moving on down” to a home that costs less than the one they currently own. Contrary to some of the information being banted about, the tax credit is equally available to homeowners who purchase down in price. The price of the new home relative to the old was never a factor in the tax credit provisions.
Many retirees especially welcome this new expansion in the tax credit. As retirees downsize or move to cheaper locales and better climates, they get to enjoy some tax benefits. Same goes for the many homowners who want to get rid of the bigger, utility-grabbing McMansions purchased during boom times.
The same tax credit requirements apply to both move-down and move-up buyers.
Guidelines say the previous home must have been occupied as the buyer’s principal residence for at least five consecutive years out of the past eight years. You must have closed the mortgage loan after November 6, 2009 and before April 30, 2010. In some cases, the buyer can sign a contract to purchase before April 30, 2010 and close no later than June 30, 2010 and still be eligible for the tax credit.
Home Buyer Tax Credit guidelines say the previous home can be maintained and used as a rental if desired.
How much is the move-up tax credit? It is 10% of the purchase price up to a maximum credit of $6,500 for joint filers and $3,250 for those filing separately. There is a full credit for singles whose income does not exceed $125,000 and for couples whose income is no more than $225,000. A phase-out applies to higher incomes up to $145,000 and $245,000 respectively.
The cost of the new home cannot exceed $800,000.
The new home must be the buyer’s principal residence for a three year period beginning after closing the loan. If not, the credit must be repaid.
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