Home Buyer’s Credit, Am I Eligible?

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Remember the $8000 home buyer’s credit? It’s set to expire at the end of this month, November 2009. Never fear, though, Congress has thoughtfully both renewed and expanded it.

For first-time home buyers: This is the extension of the first-timer’s credit, only now it’s even better. Before, you were completely phased out–meaning no credit at all–if you as a single made above $95,000 or as a couple over $170,000. Now, singles can earn up to $125,000 or couple up to $225,000 and still get the credit.  That’s a big improvement, especially in big cities where wages are higher to match the cost of living.

Who is a first-timer? If you are over 18 and haven’t owned a home in the past three years, you’re a first-timer. For this credit, you must have an accepted contract on a home before April 30, 2010 and, oh yes, you cannot buy that home from a relative. And, you must keep the home at least three years or pay back the credit.

Now, the expansion: Move-up buyers are now eligible to receive up to $6500 tax credit as well. Same income rules apply: not over $125,000 for singles and not over $225,000 for couples.

You don’t even have to sell your current residence, but the new home must become your principal residence. If you do sell your current home, watch carefully because for purposes of this credit, any taxable profits must be added to your income. But, wait, taxable profits? Remember that if you are selling your principal residence, as a single you can deduct up to $250,000 gain as tax free and a couple up to $500,000. So, this is really an issue for high-priced properties owned for the most part a good long time. Most recently-purchased homes in California are underwater at this point.

So, this is a good thing,no?

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