Tax credits for move-up home buyers

If you are looking to buy a house in Spring Texas this year, there is a good chance you are familiar with the first time home buyers tax credit.  But did you know the expanded and extended homebuyers tax credit bill that was passed in November 2009 contained a tax credit for what is being called the “move-up” home buyer?   This time around our government is not giving all the FREE money to just first time homebuyers.  Move-up homebuyers will get some FREE money too.  It’s just not as much money as first time homebuyers get. 

Here are the details on the tax credit for move-up homebuyers:

• Amount of tax credit – $6,500 or $3,250 if married filing separately

• Eligibility –
  • Must have lived in the home sold or being sold or being vacated as your primary residence for 5 consecutive years of the last 8 years.
  • Adjusted Gross Income (AGI) of up to $125,000 for singles and up to $225,000 for married couples.  Homebuyers with incomes of $125,000 to $145,000 for singles and $225,000 to $245,000 for married couples are eligible for a phase out of the tax credit. 

• Termination date of tax credit – May 1, 2010.  You have to be in contract on a new or resale home by April 30, 2010 and close on the home by June 30, 2010.  You do not have to have your existing home sold by April 30, 2010 but you do need to be in contract on what will be your new place of residence by April 30, 2010 and close by June 30, 2010. 

• Payment of funds – Homebuyers have to complete and file with their 2009 or 2010 tax return FORM 5405.  You have to use the December 2009 revised FORM 5405 and not its earlier version.  Click on the links to access the revised FORM 5405 and the instructions for FORM 5405.  Due to the additional documentation requirements of the revised FORM 5405, you can not e-file.  You have to go the snail mail route.  

• Repayment – No, if you live in the house for the next 3 years.  If you sell the house before the end of the 3 years the full amount of the tax credit will be recouped unless the house is sold at a lost.

If you are not comfortable with your financial position or your employment situation then the move-up tax credit is not going to be an incentive for you to buy a different home in Spring Texas.  But ….. if you are comfortable financially and you are thinking about buying a different home this summer, then you seriously need to reconsider the timing of your plans to take advantage of the tax credit.