New $6,500 Home Buyer Tax Credit Benefits Move-Up Buyers Great news for those who already own a home and are thinking about down-sizing or moving-up to a new home! Thanks to the recent extension and expansion of the Federal housing tax credit, qualified move-up and repeat home buyers now qualify for a tax credit of up to $6,5oo. Homes must be a principal residence and need to be purchased after November 6, 2009 and before April 30, 2010. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Homes priced above $800,000 are not eligible for the tax credit.

“Move-up” buyers who buy a new home don’t have to purchase a more expensive home than their previous home to qualify for the $6,500 tax credit., but they need to have lived in their previous home for at least five consecutive years of the eight years prior to the purchase of the new home. Both married taxpayers, must qualify.

Remember, there are income limits you must meet to qualify.  A single taxpayers less than $125,000; and the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. Ask your accountant if you have specific questions!

Is the $6500 tax credit for existing homebuyers retroactive?

Unfortunately, no.  There was some speculation as the bill was working through Congress as to whether it would be applied retroactively up to some point in the past, but it is not.

Some existing homeowners who recently purchased a new primary residence undoubtedly feel like they are being left out unfairly, but the purpose of the program is to stimulate new sales in the future, not provide people with tax relief or a credit.

I understand the purpose of the law, but if I were a recent homebuyer, I am sure I would be a little angry that I was not eligible because of the timing of my home purchase, which in some cases could be a matter of a few weeks or less, and did not receive the credit.

There are many who are concerned that this is just a subsidy for the real estate market, and does not do much for the economy as a whole. For example, those that take advantage of the new $6500 tax credit for existing home buyers will most likely be putting their existing home on the market, thereby having no net effect on the number of homes purchase overall. (Although I am sure there may be some that would buy a new primary residence and rent out their old home, for example, which seems like would be OK under the new law.