Homebuyer Tax Credit

New legislation, signed into law on November 6, 2009, extends and expands the first-time homebuyer tax credit – up to $8,000 for first-time homebuyers and $6,500 for buyers who have owned and lived in their current home for five consecutive years.  It also increases the income limits for eligibility.

The credit does not have to be paid back, provided the homeowner lives in the new home for at least three years.

Following are some details from the updated tax credit legislation:

• A "first-time homebuyer" is defined as someone who has not owned a home in the last three years.
• Current homeowners who buy a new principal residence may also claim a homebuyer tax credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived in the same principal residence for any five consecutive-year period during the eight-year period that ended on the date the new home is purchased.
• The new law raises the income limits for homes purchased after November 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross incomes between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers.
• An eligible taxpayer must enter into a binding contract to purchase a principal residence on or before April 30, 2010 and close on the transaction by June 30, 2010.
• For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

Some new restrictions apply to homes purchased after November 6, 2009, including:

• Purchasers must attach a properly executed settlement statement to their return.
• No credit is available if the purchase price of the home exceeds $800,000.

For more information, please contact a HomeStreet loan officer.