The $6500 home buyer tax credit for existing homeowners who purchase a new home and the extension of the $8000 first time home buyer’s tax credit were signed into law on Friday.
The official bill, the Worker, Homeownership, and Business Assistance Act of 2009 was signed into law by President Obama on Friday, after being passed by both houses of Congress earlier in the week.
The newly available $6500 tax credit for existing home buyers who purchase a new home (must be a primary residence) between November 7th, 2009 extends until April 30th, 2010. A home must be under contract by the April 30th deadline to qualify, and closing must be within 60 days, effectively the end of June. Home owners must have lived in their existing house for five consecutive years out of the previous 8 to be eligible.
For 1st time home buyers, the law effectively extends the deadline for the $8000 tax credit, which was set to expire on November 30th, for 5 months, to April 30th 2010. As with the new credit, the house must be under contract by April 30th, and closed on by June 30th to be eligible.
The new law also raises the annual income limits from $75,000 to $125,000 for singles and from $150,000 to $225,000 for married couples, which applies to both the $6500 tax credit for existing home owners who purchase a new primary residence, and the $8000 credit for 1st time home buyers. Obviously, this will allow a larger pool of citizens in both categories to participate.
To be eligible, a new home must cost less than $800,000, and the new homeowner must live in the house for 3 or more years (as primary residence) in order to avoid having to pay it back. The tax credit will be able to be claimed on 2009 tax returns, even if the house is purchased in 2010, similar to what was allowed in the original $8000 tax credit program for homebuyers.
Is the $6500 tax credit for existing homebuyers retroactive?
Unfortunately, no. There was some speculation as the bill was working through Congress as to whether it would be applied retroactively up to some point in the past, but it is not.
Some existing homeowners who recently purchased a new primary residence undoubtedly feel like they are being left out unfairly, but the purpose of the program is to stimulate new sales in the future, not provide people with tax relief or a credit.
I understand the purpose of the law, but if I were a recent homebuyer, I am sure I would be a little angry that I was not eligible because of the timing of my home purchase, which in some cases could be a matter of a few weeks or less, and did not receive the credit.
There are many who are concerned that this is just a subsidy for the real estate market, and does not do much for the economy as a whole. For example, those that take advantage of the new $6500 tax credit for existing home buyers will most likely be putting their existing home on the market, thereby having no net effect on the number of homes purchase overall. (Although I am sure there may be some that would buy a new primary residence and rent out their old home, for example, which seems like would be OK under the new law.
Some even predict the cost to tax payers per home sold under the program to be $100,000 +. Ouch!
Here are some other good articles on the new home buyer tax credit and the extension of the existing tax credit:
Quick! Go Buy a New Home! New $6,500 Homebuyer Tax Credit for Existing Owners and $8,000 for First-Timers Gets Extended from Prime Time Money
Why The First Time Home Buyer Credit Is Terrible For The Economy at Moolanomy
It’s Official First Time Home Buyer Tax Credit Extended Now For Existing Owners Too at Free From Broke
$6500 Homebuyer Tax Credit For Current Homeowners Signed Into Law Today. Is It Retroactive? at Bible Money Matters
Did Congress Make the Homebuyer Tax Credit Retroactive? at Five Cent Nickel
Similar Posts:
- A Look at the $8000 First Time Home Buyer Tax Credit for 2009
- Time for Homebuyer’s Tax Credit Running Out, Will it be Extended?
- What’s in the Stimulus Plan? Read the Full Text of American Recovery and Reinvestment Act of 2009
- Two Tax Deductions That Have Changed for Filing Year 2007
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{ 14 comments… read them below or add one }
Interesting credit isn’t it? I’m not sure it will help all those who are eligible though, especially existing home buyers.
Good point about the non-retro. Seems they should have extended it to all 2009 sales. They just keep monkeying around up there.
@FFB- I am not sure either- it seems as if it could be a wash as far as existing homeowners are concerned.
@PT- I agree-it seems as if they are flying by the seat of their pants when it comes to some of these tax credits and other government subsidies!
How do you know it isn’t Retroactive? Where does it specifically say that is not? Wasn’t the original bill signed in January?
@Rob- The $6500 tax credit for existing home owners who purchase a new home is new and part of the expansion of the bill- it went into effect on November 7th. The $8000 tax credit for new, 1st time home buyers (as defined by the original bill) has been extended, it did begin in January, and will extend until April 30th , 2010.
Where does it say it goes into affect on the 7th? I can’t find that anywhere. The AMENDMENT went into effect, but the bill went into effect in January. No where in the wording could I find anything to say that it only included purchased AFTER the 7th.
Rob- I had to go back and check the Bill itself, HR 3548.
The portion about existing homeowners is in section B:
(b) Special Rule for Long-time Residents of Same Principal Residence- Subsection (c) of section 36 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
`(6) EXCEPTION FOR LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE- In the case of an individual (and, if married, such individual’s spouse) who has owned and used the same residence as such individual’s principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence.’.
Further down below is the effective date, which for (b) is when the bill was enrolled-
(j) Effective Dates-
(1) IN GENERAL- The amendments made by subsections (b), (c), (d), and (g) shall apply to residences purchased after the date of the enactment of this Act.
Hope this helps clarify.
Not really. The “enacment of this act” date is still January. Again, this was just an amendment.
new info from IRS
“The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.”
“Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit.”
They Do specify that the INCOME limitations are only AFTER November 6th.
And from the Q and A from the IRS
Q. If I purchase a home in June 2009, and have already filed my 2008 tax return, can I amend my 2008 return or will I have to claim it on my 2009 return?
A. You can either file an amended return to claim it on your 2008 return or claim it on your 2009 return.
Try to help me out if you can…My husband and I purchased land (5 acres) which also included a shop in Feb 2007. The loan is classified as “Residential Real Estate.” We built a home on this land beginning in Nov 2008 and closed in June 2009. Our CPA told us that the shop was our first mortgage so we didn’t qualify for the 2008 first time home buyer. And as i understand, we don’t qualify for the new homeowner plan beacuse we didn’t live in the shop for 5 years? our plan was to buy land and build a house. It was never to call a shop our first home. any advice?
I settled on nov 6th my realtor never informed me I should wait the one day to be eligible for the existing home buyers credit which I would qualify for if I had closed on the 7th is there any recourse either against my realtor for not informing that i would not be eligible for the tax credit? Thats 6500 out my pocket apparently there is not wiggle room with the IRS?
I am so upset…we for sure thought we were getting the 6500 tax credit and didn’t know about this Nov. 7 date until today, as we closed on Oct. 22. This is very unfair and I’m very angry about it. I know there is nothing I can do, but I am devastated over it, as I was counting on this money to help us out. So it is for sure Nov. 7 then?
My husband and I have lived in our existing home for 11 years. We have been trying to decide whether to build a new home, or build on to our existing home. If we decide to build on to our existing home, would we qualify for the $6500 existing homeowner credit?