Expanded Home Buyer Tax Credit Includes “Repeat” Buyers

The expanded home buyer credit is not exclusively for first time home buyers and includes what they’re calling “repeat” buyers. It seems not everyone knows  that the expanded homebuyer credit allows eligible individuals to claim up to $6500 tax credit on their 2009 or 2010 tax return… And since this is a limited time offer, with little chance of being extended again, I figured I’d do my part to get the word out.

Here’s the lowdown on some of the details: To be eligible for the up to $6500 homebuyer tax credit, you need to have resided in your home as a principal residence for 5 consecutive years in the last 8 years previous to buying the replacement home. And most importantly, you will need to have an accepted offer on a replacement home by April 30, 2010 and close on that home by June 30, 2010. (This is where the limited time offer comes in). The home also needs to become your principal residence.

The Iowa City real estate market is doing well when it comes to the sale of lower priced homes, we’re hoping this will impact the home sales of higher priced homes as “move up” buyers upgrade and buy bigger homes. Don’t let that fact stop you if you’re thinking of downgrading and buying a smaller home though – You too are eligible for the tax credit!

Another notable point is that you don’t need to sell your home to be eligible for the credit. This takes some of the stress out of the situation if you need to sell your home and the buyer can’t close until after June 30. It also gives you the option of renting your current home and with rent prices rising in the area I know this is something some folks are thinking about.

There are a couple of changes in the expanded homebuyer tax credit compared to the tax credit that expired on November 30, 2009. The first is that the income levels of individuals able to claim the tax credit have risen. A single person may now earn up to $125,000 and married couples $225,000. (Here’s a post about the phase out range). There is also now a cap of $800,000 on the sale price of a home.

For more detailed information and FAQ’s, visit www.Federalhousingtaxcredit.com.

If you are thinking of listing your home for sale in the Iowa City area, more than likely you’d like to know how our market is trending. Below are links  to market reports for Iowa City, Coralville and North Liberty for 2009. They include the yearly numbers along with the quarterly numbers. There was a lot to report with a whole year to look back on!

Iowa City Real Estate Market Report December 2009

Coralville Real Estate Market Report December 2009

North Liberty Real Estate Market Report December 2009

To keep up with the latest market reports for the Iowa City area, along with other real estate news and community info, why not follow me on twitter or Facebook or subscribe to my blog below?

How the Extended and Expanded Homebuyer Tax Credit Works

I often get asked how the homebuyer tax credit works. It’s at times like this I remember that not everyone lives and breathes real estate like I do and maybe it would be helpful to just break it down in a post.

So the first thing you need to do is establish whether you qualify for the tax credit. You probably have an idea already. If you’re not totally sure you can check by looking at the FAQ’s on the IRS website. It’s recently been updated to include info on the new expanded homebuyer tax credit that includes repeat buyers.

Now I’m going to state the obvious and tell you that you need to buy a home. Already here there is some confusion with some folks who think you can claim the tax credit before you buy a home. That is not the case. You absolutely need to close on a home before you can claim the tax credit. The current requirement is with the new extended tax credit that you have an accepted offer on a home by April 30, 2010 and that you close on that home by June 30, 2010.

So now how do you go about claiming the tax credit? What happens is that you file your taxes as usual and fill out the form 5405 claiming the amount you qualify for. Unfortunately it is not possible to file your taxes electronically in 2009 as the IRS has tightened its procedures.  If you filed your tax return in 2008 and claimed the first time homebuyer credit you didn’t need to provide proof that you had bought a home (!!) That changed with the new extended tax credit and it will now be necessary to submit the settlement statement, (HUD), that you sign at closing.

Now comes the big question. What do you do if closing is AFTER April 15, 2010, the deadline for filing your 2009 tax return? Easy answer: Hold off on filing your taxes and request an extension. The extension will give you all the way up to October 15 to file your 2009 tax return. Plenty of time, since one way or another you need to buy a home by June 30 anyway. If filing an extension sounds like a hassle, take it from me, it isn’t. My son did it last year at Taxslayer.com and it went as easy as 1-2-3.

One last thing I want to point out is that this is a refundable credit. What that means is that if the amount of the tax credit exceeds your tax liability you will get a check in the mail for the difference.

Keep in mind that I help clients buy and sell real estate in the Iowa City, Coralville and North Liberty area. Please let me know if you have any questions.