Looking for clear guidance on the new $6,500 federal tax credit for repeat home purchases...here you go.
The Internal Revenue Service finally has published the exact rules for the repeat purchase credit that was signed into legislation in November. The revised Form 5405 can apparently be found on the IRS website as of this last week.
The repeat buyer credit is an addition to the well know and popular $8,000 credit for first-time buyers. "Homeowners who have occupied the same property as a principal residence for any five consecutive years during the previous eight years may now be able to claim a tax credit on a purchase of another home they intend to use as a principal residence."
The credit has its small print, so be sure to look at everything and ask your accountant. The purchase contract must be dated from Nov. 7, 2009, to April 30, 2010, and the closing date can not extend beyond June 30th, 2010.
To be eligible, the maximum purchase price on homes is $800,000. There is no requirement in selling your previous home, but you must demonstrate that the replacement home will be your primary residence.
There is numerous excess documentation required now by Congress after reports that substantial widespread abuses had been occurring by those seeking the $8,000 credit for first-time buyers. Some of these claims seem to stem from credits on properties that never were sold or bought. Now, the IRS says, "it is going to rigorously investigate all claims filed, starting with a review of the documentation submitted."
Within the new IRS guidance, their are revised income limits for home buyers claiming credits:
- If you are single, your adjusted gross income must not exceed $125,000 and $225,000 if you are married filing a joint return.
- Above these limits, the allowable credit amount begins to phase down in increments, and it is eliminated once incomes reach $145,000 for single individuals and $245,000 for married joint filers.
There are pitfalls as well such as repaying the tax to the government by taxpayers who sell their homes within a 36-month period after purchasing the home.
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For more information on Real Estate here in Santa Barbara, Montecito and/or our surrounding areas, as well as any other aspects of life in the Santa Barbara area, please don’t hesitate to contact Kevin Schmidtchen at Sotheby’s Int’l Realty.