Getting the $6500 Tax Credit as an Existing Home Owner

adobe home in sam hughes, tucson, az So if you read regularly, you remember that the former $8000 first time home buyer tax credit got extended and expanded so that now it includes those people who already own a home.

And, by the way, a homeowner is defined as someone who has owned and used a home consecutively for at least 5 of the 8 previous years. 

There’s a little confusion though with the wording.  Because you don’t actually have to sell your existing home to get the credit.  Michelle Lind, general counsel for the Arizona Association of REALTORs explains.

Q: I’m already a homeowner. If I buy a replacement home after Nov. 6, 2009, to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit?

A: If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (11/17/09).

(h/t to my friend Dru Bloomfield for the find)

Just remember – to take advantage of the $6500 credit, you need to be under contract on a home that is to be your new principal residence by April 30, 2010 and close by July 1, 2010.  The credit applies to homes priced up to $800,000.  Income limits for couples are $225k and $125k for singles, with an additional $20k phase out.

And the rule that didn’t change: if you sell the home within 3 years of buying it – or stop using it as your principal residence in those 3 years – you gotta pay back Uncle Sam for the full amount.

There’s an excellent IRS Q&A on the Tax Credit here.

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