Homebuyer Tax Credit Summary

November, 2009

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Overview of Changes

• In November, 2009 Congress extended and expanded the Homebuyer Tax Credit.

• Under the extension, purchase contracts must be in effect by April 30, 2010 and close by July 1, 2010.

• Income limits, credit amount, and current homeownership status have changed under the expanded plan.

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Phase Out StartIncome LimitType

Single Filers $125,000 $105,000

Married Filers $225,000 $205,000

Income Limits Increased

This means that for singles making over $105,000 and couples making over $205,000, the credit is proportionately reduced as incomes approach $125,000 and $225,000 respectively.

Applies to First Time and Current Homeowners

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•First time buyers •$8,000 credit •$4,000 married filing separately

•Current Homeowners•$6,500 credit •$3,250 married filing separately

Credit Amount

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Definition

• A homebuyer who owns a home and has used it as their primary residence consecutively for 5 of the previous 8 years.

– For example, if a person owned a home for 10 years and sold it two years ago and has been renting since that time, they would be eligible for the tax credit.

First-Time Homebuyers

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Definition

• A homebuyer who has not owned another primary home at any time during the three years prior to the date of purchase.

– For example, if a person purchases a home on December 1, 2009 and has not owned, or had an ownership interest in another home at any time from December 1, 2005 through December 1, 2009, he or she is eligible for the tax credit, even if the new home is not the person’s “first” home purchase.

Current Homeowner

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Cost of Home

The purchase limit of $800,000 applies to both First Time Buyers and Current Homeowners.

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•A written binding contract to purchase must be in effect on April 30,2010.

•The purchaser will have until July 2010 to close.

Binding Contract Rule

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Important Points

• For existing homeowners, the new home does not have to cost more than the current home they are selling.

• If someone is under contract prior to November 6 but has not closed on the home, they are subject to the provisions of the current legislation.

• If a buyer currently under contract didn’t qualify based on income under the previous legislation but needs the requirements of the new credit, they qualify even though the contract was written prior to November 6.

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• The home subject to the credit must be the “main home” (i.e.: principal residence, where the homeowner spends 50% or more of his or her time). It can be a condo, single family detached, co-op, townhouse or something similar.

• The home must be located in the United States.

• Vacation homes and rental properties are not eligible.

• For new construction, the “purchase date” is the date the homebuyer occupies the home. So the move-in date must be before April 30, 2010.

The Home

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• If the home is resold prior to three years of ownership, the tax credit must be repaid.

– This is an improvement from the prior credit. That credit needed to be repaid in total over 15 years or the balance had to be repaid on resale.

• This provision is designed to prevent flipping homes in order to get the tax credit.

Recapture- 3 Year Residency

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• The credit is also available to residents of the District of Columbia.

• Purchasers who utilize state/local revenue bond financing can now use the credit.

Other Provisions