What the $6,500 homebuyer tax credit means for you(Read article summary)
The $8000 new homebuyer tax credit has been expanded through 2010 to include existing home owners at $6500. But why?
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During the first round of the government's homebuyer tax-credit program, only first-time purchasers could qualify for up to $8,000 in tax credits. But this time, many current homeowners could get in on the deal, too.
On Thursday, the House and Senate passed an extension of the popular homebuyer program that would allow people who have owned their homes for at least five years to buy a new home and get up to $6,500 off their tax bill. Why the switch?
The move may be aimed at luring higher-end buyers into the real estate market, says Kevin Cottrell, a principal and cofounder of Kelsey Cottrell Realty in St. Louis. During the initial incentive program, which ends Nov. 30, over 70 percent of the contracts his firm inked were under $300,000, and 90 percent were under $400,000, the lower end of the real-estate spectrum. By extending the credit to current homeowners, the federal government is aiming to move a more upscale segment of the market into "a more normal cycle of buying and selling," where people might move to a better home every seven or eight years, Mr. Cottrell says. The five-year ownership requirement discourages people from flipping houses the way they did during the real estate bubble.
President Obama is expected to sign the bill quickly. Here's what it means for you:
– First-time homebuyers still qualify for up to $8,000 in tax credits; those who have owned their homes at least five years qualify for up to $6,500 in credits.
– Purchases must be secured by April 30, 2010 and closings finalized by June 30.
– Single taxpayers with an adjusted gross income under $125,000 (under $225,000 for joint filers) are eligible for the credit's full benefits. Those with incomes up to $145,000 (single) or $245,000 (joint) may receive partial credits.
– Homes worth $800,000 and under are eligible for the program.
– Members of the military serving outside the United States for more than 90 days will have until June 30, 2011, to qualify for he incentive.
– The program is expected to cost the federal government $10.8 billion in lost taxes.