When the tax credit for first-time home buyers was extended last November, those who already own homes were no longer left out in the cold.
Suddenly, “repeat buyers” became eligible for a tax credit up to 10 percent of the purchase price of a new home, capped at $6,500.
That was good news to Michael and Deanna Hollifield, who had put their Nashville home of 10 years on the market in order to move to the suburbs. “We hadn’t heard about this tax credit for existing homeowners,” says Hollifield, 45, a computer technician at Vanderbilt University Medical Center. “It was a really good bonus for something we had already decided to do.”
For retirees Janet and Larry Koch, however, the tax credit was the incentive to buy a home in a 55-plus community outside Phoenix. “When we first saw Dolce Vita we thought it was breathtaking, but we didn’t think we could afford it,” says Larry Koch, 66, the former owner of a motorcycle dealership in White Bear Lake, Minn. “But when we heard about the tax credit we said, ‘now’s our chance.’ ”
Koch suggests talking to your accountant before proceeding with the repeat buyer tax credit, which is part of the Worker, Homeownership and Business Assistance Act of 2009. “The instructions are very, very complicated,” he says.
Qualifications for the repeat home buyer tax credit:
- Your old home must have been your principal residence for five consecutive years within the past eight years.
- Your new home must become your primary residence.
- There is a $125,000 annual income limit for single taxpayers, or $225,000 for married couples filing jointly.
- Buyers can downsize or trade up, but the purchase price must not exceed $800,000.
- Sales contracts must be signed by April 30, 2010, and closings must take place by June 30.
Will this repeat home buyer tax credit have an effect on the housing market? “The big problem is that you haven’t really reduced the surplus housing stock,” says David Wyss, chief economist at Standard & Poor’s. “You’ve just switched one house for another.”
But Michael Hollifield isn’t looking at the big picture. “The tax credit sure did come at a good time,” he says.
Cathie Gandel writes about consumer affairs. She lives in the New York area.