Legislation was approved last month that provides a $6,500 tax credit for some current homeowners who buy another home. The law also extends the $8,000 tax credit for first-time homebuyers.
Here are questions and answers provided by Florida Realtors:
Q: How do I qualify for the $6,500 credit?
A: This credit is available for homebuyers who sign a binding contract on a new or existing home by April 30, 2010, and settle by July 1 (deadlines that also apply to the first-time homebuyer credit). The buyer must have lived in his/her existing home for five consecutive years out of the last eight. The home purchased must be the primary residence. However, the law doesn’t require the person to sell his old home - it can be used as a second home or a rental.
Q: A family sold a home that they had lived in for more than five years and bought a new one in August. Do they qualify for a tax credit?
A: No. For existing homeowners, the $6,500 credit is limited to homes purchased after Nov. 6.
Q: Does the home a person buys have to be more expensive than the one they own now?
A: No. While the real estate industry is hopeful that homeowners will use this credit to buy a nicer place, there’s no prohibition against using it to downsize. That makes this credit particularly useful for seniors who are interested in moving into a smaller home.
If a person is planning to move up, he can’t claim the credit if the purchase price of the home exceeds $800,000. The $800,000 cap also applies to first-time homebuyers, but only those who purchase a home after Nov. 6. First-time homebuyers who bought a home for more than $800,000 between Jan. 1 and Nov. 6 can still claim the credit, assuming they meet the other criteria.
Q: An existing homeowner would like to build a new home. Can he claim the credit?
A: Yes, as long as a binding contract is in place by April 30 and close by July 1.
Q: A person bought a home in 2008 and claimed the old $7,500 first-time homebuyers credit, which must be repaid over 15 years. Did the new law change that rule?
A: No. That credit, which was available for homes purchased between April 9, 2008, and Dec. 31, 2008, must still be repaid.
The $8,000 first-time homebuyer credit, available for homes purchased after Dec. 31, 2008, doesn’t have to be repaid as long as the buyer remains in the home for at least three years. Existing homeowners who qualify for the $6,500 credit don’t have to repay that money, either, as long as they meet the three-year requirement.
Q: A family has a rental home and would like to sell it to their son, who has never owned a home. Would he qualify for the first-time homebuyer credit?
A: No. The legislation specifically prohibits taxpayers from claiming the credit if the sale is between “related parties.
Q: A person sold their home this year and have been renting since. If they buy a new home, do they qualify for the expanded credit?
A: Yes, as long as they meet all of the other requirements.