I love to be the bearer of good news and this is some of the best news for home buyers and sellers in a long time. I just called a client of mine who already had her home under contract and scheduled to close on November 30th. She is also buying a new place in Evergreen. Since she is a current homeowner, the first-time home buyer tax credit which has been in effect since February 2009, did not apply to her. Since the new Bill signed today includes a credit for existing  homeowners, she now has a cool $6500 bucks coming her way. Pretty sweet – right?

The Big News: The new legislation adds a $6500 tax credit for existing homeowners who contract to buy a new home by April 30th, 2010. The home you sell must have been your current residence for a consecutive 5 years out of the last 8. The income limits are the same as for first time home buyers (see below) and the new home can cost up to $800,000. You have to be in a written binding contract to purchase the new home by April 30th, but have until July 1st to actually close or finalize the sale. The 5 consecutive years rule is meant to keep investors and fix and flip buyers from receiving the tax credit. 

The $8000 first time home buyer tax credit that was set to expire at the end of November, has been extended until April 30th, 2010. Also, the annual income limits to qualify for either credit have been increased from $75,000/single and $150,000/married to $125,000/single and $225,000/married. Above those income levels, the credit is reduced and eventually phased out. The rules are still the same for determining a “first-time home buyer” – you just have to have not owned a home as your personal residence in the last 3 years.

Note that a credit is way better than a deduction. You get that amount taken right off your taxes due and if you owe less than the credit amount, you get the difference refunded to you. So  if you file your income taxes and owe the IRS zero, they send you a check for $6500 or $8000 smackeroos.

This new Bill should really help along a real estate market that was already seeing some modest signs of improving. Between these tax credits and historically low interest rates (still hovering around 5%). It could be a great time to make a move and buy a house. I would still recommend that you only jump in and make the move if you are planning to be in the new house for a good 5 years or more. These are still not times to make a quick buck in real estate. But if you have been thinking about buying, now is a great time.

For more info check these out – Frequently Asked Questions  or Summary of Changes

Blog posted by elephant’s  Realtor – Liz Benson