Focus on the $6,500 Tax Credit
Housing stimulus package version 3.0 is out and the $8,000 tax credit is again stealing the headlines. The $6,500 tax credit is pretty incredible for growing families that require a bigger home, empty nesters that are downsizing their primary residence, and can even work for a single bedroom condo owner moving into a 2-flat.
The basic info on the IRS site is pretty thorough. If you have questions over mobile homes, house boats, and RV’s, refer to the IRS site. These are the questions we’re hearing most often:
What are the Income Limits?
The new income limits significantly expand who can qualify for the tax credit.
| On or before Nov. 6, 2009 | After Nov. 6, 2010 | |
| Married Couple, files jointly | $150,000 (phase out: $170,000) | $225,000 (phase out: $245,000 |
| Other Taxpayers | $75,000 (phase out: $95,000) | $125,000 (phase out: $145,000) |
Can I upgrade to 2-flat or multi-unit property?
Yes. Chicago natives may have difficulties speaking to the IRS. Our “2-flat” is their “duplex.” The IRS guidance so far–
you may qualify for the credit for the dwelling unit that you use as your principal residence. To determine the amount of your credit, you must allocate the purchase price of the duplex between the two separate dwelling units. You may not use the entire purchase price of the duplex to determine the amount of your credit.
For that Roscoe Village style two-flat with the large owners’ unit and smaller rental, contact your tax professional to walk through how to allocate the purchase price.
Do I qualify for the $6,500 tax credit?
The most confusing part has been the use of “upgrade” buyer in some publications. You do not need to purchase a more expensive home. The law defines a qualified buyer by “long-term resident.” This means the same home for at least five consecutive years of the prior eight.
Do I need to sell my home to qualify for the $6,500 tax credit?
No. This is direct from the IRS:
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.
Other Resources from the IRS:
As always, there are tax and bigger financial implications than we can cover inside of a single post and this is not designed to replace the consultation with a tax professional before making a decision.
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