Many people want clarification on exactly who is eligible for the new $6,500 homebuyer tax credit. Read on to see whether or not you qualify.
Here are two more recent posts on the matter:
- Tax Credits for Home Buyers and Homeowners
- First-Time Homebuyer Credit – 2009 Returns must be filed on Paper – No eFile
The measure deals primarily with extending and expanding the homebuyer tax credit along with unemployment benefits and business tax credits.
A question looming large on the minds of a lot of many people is whether the $6,500 homebuyer tax credit will be retroactive or not. Meaning, if you purchased your home before the inception of the tax credits, are you eligible for a credit?
Unless Congress has a sweeping change of heart, to the discouragement of many American home owners the answer is NO. As I mentioned in an article earlier, the wording in the bill goes like this, “shall apply to residences purchased after the date of the enactment of this Act.” According to the bill the credit is being expanded to include a $6,500 tax credit to non-first time home buyers who purchase between November 7th, 2009 and May 1st, 2010.
So Exactly WHO gets the $6,500 credit?
- Non-first time home buyers who have lived in their previous residence for at least five out of the last eight years but are selling that home and buying a new home by May 1st, 2010. The new home must be used as a primary residence.
And Exactly WHO gets the $8,000 credit?
- First time home buyers who purchase a home before May 1st, 2010. The new home must be used as a primary residence.
Please note that… any home owner who sells the newly purchased home or ceases to use it as a primary residence within three years of the purchase date must repay the credit. And in both situations the yearly income limits are $125,000 for individuals and $225,000 for couples.
Why Not Make the Homebuyer Tax Credit Retroactive?
When considered from the perspective of why the legislation was enacted in the first place, not extending the tax credit to existing home owners makes perfect sense. They originally extended the credits to new buyers with the purpose of stimulating the housing market. Simply passing the credit on to everyone who has purchased in the last five years would be disastrous and is quite unfeasible.
Will This Stimulate the Economy?
Ultimately the decision to extend these credits was made in order to further stimulate the housing market by encouraging existing home owners to sell their current residence and buy again. Will this have the effect they are hoping for? What do you think?
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DFA is passionately dedicated to helping people break the bondage of debt and work toward financial freedom using biblical principles.
Let’s keep them stimulus coming! Hope all get to recycle the free money 🙂
But wasn’t the enactment created in January, and this is just an amendment to that enactment? The way I see it, is that it will be retro to January 1st when the bill was first signed.
That would be too fair or way to easy. Obama did not get my vote last time and he definately will not get it next time
I need some help…. I am selling my old house that I have lived in for over 5 years…. But I am going to go ahead and rent it because it hasn’t sold….
I am buying a new house and not closing on it till later in Dec. This new home will be my primary residence ….
Do I get the $6500 credit without selling my house?
Hi Penny.
Although the legislation does not specifically address your situation, according to what you said in your comment, you should get the credit. I it were me, I would call a few local real estate attorneys and see if one of them could give a free consultation.
Penny,
The way it reads (to me at least) you should qualify when you do sell it. As long as you just have lived there a total of 5 years during the past 8 years. Meaning, you could have lived there in 2001 to 2003, rented in 2004, lived there again in 2005 to 2009. It just has to add up to 5 out of the past 8.
It is much like the capital gains tax that you might have to pay if you sell you house and make a profit. If you have lived in you house 3 out of the past 5 years capital gains does not apply.
All of these assume that this is your primary residence.
If you lived in the home at least 5 of the last 8 years and you buy another principal residence and live in it and don’t sell it for at least 3 years, you probably qualify without having to pay back the credit.
Don’t forget, if you sell your old home at a gain, you may have some of your capital gain exclusion reduced if you sell your home and it had been rented in 2009 or after. Please contact your CPA if you have questions about this.
I think that this really sucks. I was a first time homebuyer in 2003 and did not get anything, i sold that house in July 2009 and bought another one in 2009 and now i will not qualify. If they are gonna extend the first time home buyer offer then i think that they need to retro the $6500 offer back to inception of the 1st time homebuyer program. Just another way that obama is screwing the folks that is really the ones who are trying to do right.
While I agree that it seems unfair to those who have just purchased homes and don’t fit the parameters of the law, think instead of how grateful you should be that you can even own your home. There will always be some people who will be excluded from new tax benefits for some reason or another, no matter when the new tax legislation was or is passed into law by Congress (don’t forget, it’s the senators and representatives who make the laws, not the President). If you are unhappy, blame the Congressmen/women who approved and passed the law.
The Congressmen/women keep getting it wrong. To create stimulus, you need to give money to people who are not expecting it. Those are the ones that will spend it, not someone who buys or sells a house because of an incentive. They will just buy more house and not spend the money. This existing homeowner credit should be retroactive to the start of the first time home buyers credit and I guarantee the homeowners that have already purchased a home based on their current financial situation will be the ones to stimulate the economy the most, not the new deals.
Yeah… I agree Dennis. And to go one step further… the government needs to check itself and stop meddling in the affairs of economics and “free” markets.
Or rather challenge your Congressmen/women to read the bills before voting on them… novel idea I know, but they honestly do not even read them.
I sold my house of 12 years in December 2007 and moved in with my fiance. I’m now buying a house and closing in the next month or so. Am I out of luck?
You’ll need to consult a local tax attorney or accountant to figure out if you are eligible.
I’ve been included in taxations for longer then I care to acknowledge, both on the private side (all my employed life-time!!) and from a legal stand since satisfying the bar and following tax law. I’ve supplied a lot of advice and righted a lot of wrongs, and I must say that what you’ve posted makes perfect sense. Please uphold the good work – the more people know the better they’ll be armed to deal with the tax man, and that’s what it’s all about.
Created this petition for anyone like myslef who purchased a home between 1-1-09 and 11-06-09 and would have qualified for the $6500 if it was retroactive
http://www.thepetitionsite.com/1/homebuyer-credit-expanded-and-extended-isnt-rectroactive-for-2009
Nick, why do you think it isn’t retroactive. There is nothing to say that it is not. And according to the IRS they are making statements about people that purchased homes before November as long as you were within the original income limits.
What it comes down to is the IRS 5405 form and how the IRS views the law. It is still in the workings for getting revised.
We have lived with my daughter in her house for 6 years and now want to purchase the home from her. We will be purchasing around March of 2010. We have not owned a home for many years. Will we qualify for either the $8000 or $6500 credit for home buyers?
Thanks for your question Linda. To make your proper decision I advise you to present your complete situation to a tax or real estate attorney. But based on the info you gave here, I would say no… you will not be eligible due to the fact that you have owned before, but not consistently over the last 5 years.
I seem to be the odd man out. I purchased my first home Feb. ’07. It seems as though I don’t fall into either first time[$8000] or existing home owner[$6500] category.
can I sell my home to my son who is a first time home buyer And will I get the 6500 credit on my new home I have meen in my home over ten years
I don’t see why not, unless it is specifically forbid in the tax code.
can a relative buy your home and be a first time home buyer
Yes the $6500 is retro according to the draft of the new form which is supposed to be approved today.
Is the $6,500 tax credit for previous home owners buying a new primary residence contingent upon selling your old (or shall we say current) residence? If so, what is the time frame/dates/deadlines for that? Thanks.
New form and instructions now published
http://www.irs.gov/app/picklist/list/formsInstructions.html?value=5405&criteria=formNumber&submitSearch=Find
Stupid IRS. The actual law is open to interpretation, but unfortunatly we have to go off of what the IRS thinks, and they say not retro. That really pisses me off. I had to pay an extra $8K because of this plan, and I don’t get a penny back.
What a joke.
Lets punish those who are actually helping out the economy without handouts. I would have used this to pay for a fence and employ those to install it. Oh well, our country is going to hell reguardless.
I have owned my house for 7 years now and I am trying to sell it. I know Im going to have to hope to break even or even sell at a loss but I was told I could get a tax credit for it? How much and what are the rules on it? Im probably just going to rent for a while while I figure out my job situation, so will that mess anything up?
Sounds like you should be able to claim the credit Chip… as long as you meet the conditions they lay out in the form.
My husband and I sold our home that we lived in for a little over 5 years August 2009, then bought a new house and closed the first part of September 2009. Is any of that tax credit business they re-enacted retro to those dates? I really have a hard time following all the hoopla!
I bought my first home in Decemeber 2011, will I get a tax break or any credit?
Not this credit, but talk to a local tax accountant to see if you have any credits that apply to your situation.