Expanded and extended homebuyer's tax credit expected to boost home sales

The passage of a law on October 06, 2009 that extended and expanded the first-time homebuyers' federal income-tax credit will give a boost to the market while extending the tax credit to include even more home buyers then ever before.

The new law extends until June 30, 2010, the deadline for closing escrow for first-time homebuyers to receive a credit worth as much as $8,000. The credit had previously been set to expire November 30, 2009. It also adds a credit worth as much as $6,500 for repeat buyers, provided they have lived in their existing home for at least five of the last eight years. Qualifying income limits were raised substantially for all buyers of homes purchased November 07, 2009 or later.

The higher income limits apply to both first-time and repeat buyers. The full credit amount is available to married couples filing jointly with an adjusted gross income of up to $225,000 ($150,000 under the previous credit) and single tax payers with an adjusted gross income of up to $125,000 ($75,000 under the previous credit).

Considering the values of the homes in the Burbank area and other areas of Los Angeles County most of the buyers that I represent will qualify for the maximum credit available to them as long as they do not have too high of an income that would then cause the credit to be phased down or eliminated based on income limits.

The $6,500 credit for repeat homes will also help energize the slower move-up market of higher-priced homes.

Even though the federal government extended and expanded home buying credits, the California State income-tax credit, worth as much as $10,000 for new home purchases that rolled out in March of 2009, ran out of funding in just four short months. California law makers failed to vote on a law that would have provided an additional $30 million for the state credit. The expired California credit had only affected buyers of new homes bought from a builder like KB Homes.

Here are some major points of the new law.   

·  In October 2009, Federal legislation passed and as a result extended the $8,000 federal income-tax credit for first-time homebuyers, added a $6,500 credit for qualified repeat buyers, and raised qualifying income limits for buyers of homes that closed on November 07, 2009 or later.

·  The credit applies to purchases of new or existing primary homes. For both first-time and replacement homes purchased November 07, 2009 or later, the purchase price cannot exceed $800,000.

·  First-time homebuyers can receive a credit worth 10 percent
of the home´s purchase price, up to a maximum of $8,000. A first-time homebuyer is someone who has not owned a home in three or more years.

·  Qualified repeat buyers can receive a credit worth as much as 10 percent of the replacement home´s purchase price, up to a maximum of $6,500.

·  The full credit amount is available to single taxpayers with
an annual adjusted gross income of as much as $125,000
(credit phases out for incomes of $125,000 to $145,000) and married couples filing jointly with annual adjusted gross income of as much as $225,000 (credit phases out for incomes of $225,000 to $245,000.)

If you have any questions about this credit or how it works feel free to Mike a call at (818)370-2490. This information is provided not as tax advise but as great information that you need to know.


Mike Boyle can be reached at 818-370-2490.