Figuring out the home-buyer tax credit
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Is there a home-buying tax credit in your future?
Columnist Kathy M. Kristof details the changes that will allow millions of additional people to take advantage of the $8,000 tax credit for first-time home purchasers, under legislation signed Friday by President Obama. The new law raises the income restrictions for first-timers, creates a $6,500 credit for longtime homeowners and launches more-accommodating rules for members of the military.
The fine print, particularly for current homeowners, can be more than a little confusing.
If you have owned and lived in a home for at least five consecutive years of the last eight years, you could qualify for a $6,500 tax credit, if you buy a new home between now and April 30. The ‘five-of-eight’ requirement means that this credit could accommodate people who lost their homes in the last year or two to foreclosure or even sold a house and didn’t immediately replace it, said John. W. Roth, senior tax analyst with CCH Inc., a Riverwoods, Ill., publisher of tax information. Would you have to sell your residence for it to qualify for the $6,500 credit, if you wanted to buy a new one? Not necessarily, Roth said. The home you purchase must become your principal residence, so you would have to move there. But nothing in the law says you cannot keep your existing residence as a second home or rental, he said. If you do choose to sell your existing residence, you need to pay close attention to how much you earn on that sale, Stretch said. That’s because taxable profits from the sale of your residence will be added to your other earnings to determine whether your adjusted gross income exceeds the allowable thresholds.
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-- Nancy Rivera Brooks
