NorCalSavant

I am back to the blog after spending months being extremely busy looking to buy a house.  We finally bought the house, and of course, soon after Congress passed the Worker, Homeownership, and Business Assistance Act of 2009, which includes a $6,500 credit for repeat homebuyers but only for those who buy their houses after November 6, 2009.  We missed the opportunity to pocket $6,500, but you can still take advantage of the program.

The initial American Recovery and Reinvestment Act of 2009 provided an $8,000 credit for first-time homebuyers as I had discussed in my post here. The program was supposed to end on November 30, 2009.  However, the woes that befell our economy and the housing industry in particular have shown no signs of going away easily. In response, Congress passed the Worker Homeownership and Business Assistance Act of 2009 which extends the first time home buyer credit program to April 30, 2010. In a surprising move, Congress extended a credit of up to $6,500 to even existing homeowners for buying a house.

To take advantage of the program, you have to sign a contract to buy the house by April 30, 2010 and close the deal by June 30, 2010. The repeat buyers have to have the new house as their principal residence, and should have stayed in the same principal residence for five consecutive years during the last eight years.  The act also increases income limits for taxpayers eligible to take the credit under the program.  The tax credits for purchases after November 6, 2009 are phased out for a modified adjusted gross income (MAGI) between $125,000 and $145,000 for single filers and between $225,000 and $245,000 for joint filers. The existing tax credits for purchases on or before Nov. 6, 2009 phase out at a MAGI of $75,000 to $95,000 for single filers and $150,000 to $170,000 for joint filers.

The complete text of the Worker, Homeownership, and Business Assistance Act of 2009 is available here.  The Internal Revenue Service has information on the home buyer tax credit on its website here and here.  The National Association of Home Builders also has information on the home buyer tax credits on this website.  Together, these should answer most questions you might have on the credit.

One thing to note is that if you sell your existing home, the profit on the sale might be counted towards income in determining eligibility for the tax credit.  However, only the profits beyond the historic exclusions (from taxes) of $250,000 for single filers and $500,000 for joint filers are counted towards income.  This LA Times article explains this in more detail.

Missed the boat?

Yeah, we missed the boat on the substantial $6,500 credit. But actually it’s more like the boat missed us.  We crossed the river without a boat like everyone in our shoes was supposed to.  Only later, the powers-that-be decided to send a boat to provide incentives to cross the river. We had no idea that there was going to be a tax credit for existing homeowners. If we knew for sure, we would have waited.

But, no big deal. It was still a good time to buy a house.  We bought the house at an almost 40% discount from the price the previous owner paid for it almost 5 years ago.

If you are considering buying a house, you should definitely consider buying within the window providing for the tax credit, especially because it is a refundable tax credit.  In other words, you get paid the complete credit even if you owe no taxes or less taxes than the credit. The downside risk of substantial price decline seems minimal at this time because the house prices have stabilized or even crept up in some markets.

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