Existing Homeowners and the Tax Credit

VictorianI’ve been getting a lot of phone calls and emails from existing homeowners during the last two weeks. They want to know if they qualify for the $6,500 home buying tax credit that was recently signed into law.

The new rules for current homeowners regarding this credit are:

1. You must have lived in your current home consecutively for 5 of the last 8 years.
2. You must have a written, fully accepted contract on your next home, which will be used as your primary residence, by April 30, 2010.
3. You must close on the purchase of your next primary residence before July 1, 2010.
4. Your income must not exceed $125,000 as a single filer or $225,000 as a joint filer in order to qualify.
5. The price of the home you are purchasing is capped at $800,000 in order to qualify for the credit.

If you meet each requirement you’ll be eligible for the $6,500 when you file your taxes in 2010 or 2011.

Here are a few of the questions I’ve received and the answers, as many of you may have the same questions…

Do I need to sell my existing house by April 30, 2010 or July 1, 2010? As far as I understand, No. As long as you are using the new purchase as your primary residence (you live there more than 6 months out of the year), you do not have to sell your current home in order to qualify for the credit. Most people don’t really want to carry two mortgages unnecessarily, so hopefully if you wish to only own one home, your current home will sell during that timeframe or shortly thereafter. However, if you’ve wanted to become a snowbird and move South for awhile and would only live here for less than 6 months a year, this may be a good opportunity for you to take advantage of the $6,500 credit.

Does it matter if I’m moving from a single family home to a condo? No, it doesn’t matter. As long as the property you’re buying will be your primary residence, it doesn’t matter if it’s a different type than what you already own. You can purchase a single family residence, a condo, a co-op, or a multi-family home.

What if I want to buy a house that’s listed for $825,000? As long as the purchase price for that home turns out to be $800,000 or less, you’ll qualify for the credit if you meet the other criteria. So try to get the seller to negotiate downwards!

I sold a house that I was living in for 6 years last spring. Since then, I’ve been renting. Would I qualify for the credit if I decided to buy again? Yes, since you lived in the house you sold for at least 5 consecutive years out of the last 8 years, you would qualify. It doesn’t matter that you took a break from owning and are currently renting.

Is the $6,500 really worth me selling my house and buying in the next 5 months? Really only you can answer this question. Were you planning on moving in the next 5 months anyway? If so, then I would say, yes. If you weren’t planning on moving for a few more years, I would say wait the few years.

These are a few of the questions I’ve seen. If you have more, please send them along and I’ll address them. Also, next week I’ll be posting my thoughts about how I think the expanded home buyer credit is going to affect our market in Greater Hartford over the upcoming months. If you have specific questions related to this, please email me and I’ll try to address them.