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New $6,500 Homebuyer Credit for Long-Time Homeowners

Updated: 11/20/2009
Article ID: 7602

Credit can help current homeowners buy another

The popular homebuyer tax credit is no longer just for first-time buyers with modest incomes.

Many current homeowners, or those who've owned a home recently, can qualify for a tax credit worth as much as $6,500 on a home purchased after November 6, 2009 and before May 1, 2010.

The expanded homebuyer credit is part of the Worker, Homeownership, and Business Assistance Act of 2009, signed into law on November 6, 2009. It also extends the First-Time Homebuyer Credit through April 30.

In addition, the law allows more middle and upper middle-class buyers to qualify the credit, whether they're first homebuyers or current homeowners purchasing a new home.

Qualified buyers can obtain the credit shortly after closing the purchase of  their homes. Buyers who complete their purchases in 2010 can receive their credits by claiming them on their 2009 tax returns, or by filing amended 2009 returns.

Who qualifies for the credit

To qualify, the buyer (and if married, the buyer's spouse) must have lived in the same residence for five consecutive years out of the past eight-year period.

The home must have been the buyer's primary residence during the five years.

A principal, or primary, residence is where you live for most of the year.

Income Requirements

Single taxpayers can qualify for the entire $6,500 credit if their income is less than $125,000. The credit decreases as modified adjusted gross income rises above $125,000 and it disappears altogether above $145,000.

Married couples can qualify for the entire $6,500 credit if their joint incomes are less than $225,000. The credit starts to decrease at modified adjusted gross of $225,000 and disappears after $245,000.

Other requirements

You must be 18 years or older on the date of purchase. If married, at least one spouse must be 18 or older.

You can't be claimed as a dependent by another taxpayer during the year you buy the home.

Home price and credit

The credit is equal to 10 percent of the home purchase price, up to a limit of $6,500.

The purchase price is generally your down payment, if any, plus your mortgage.

A mortgage can be a first or second mortgage or notes you gave the seller in payment.

The credit does not apply to any home purchased for $800,000 or more.

What qualifies as a principal residence?

It can be a house, a condo, co-op, house trailer or houseboat, within the United States.

Vacation and rental homes are not eligible.
 

Important considerations

The credit can not be taken if you buy your home from a close relative, such as your spouse, parents, grandparent, child or grandchild -- or your spouse's close relative.


 

How does the credit affect the taxes I owe and the refund I get?

The credit reduces your tax liability, that is, the amount of taxes you are required to pay. Depending on your tax withholdings, you could get a bigger refund or owe less in taxes when you file.


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