Since the home buyer tax credit was extended into the first half of 2010 on November 6th of this year, I have been receiving the same questions from clients about the details of the credit. I thought this would be the perfect opportunity to list the top ten questions with answers for San Mateo County borrowers about the expanded and extended home buyer tax credit.
What exactly is a ‘Tax Credit’?
A tax credit is a dollar for dollar reduction in the taxes you owe the IRS. For example, if you are eligible for the full tax credit of $8,000 and you owe $10,000 in taxes, you subtract the $8,000 from what you owe. Instead of owing $10,000 in taxes, you would then owe only $2,000.
Example
| Amount Owed in Annual Taxes | $10,000 |
| - Credit | -$8,000 |
| Remainder Owed to IRS | $2,000 |
If you don’t owe any taxes, the IRS will issue you a check for $8,000 (if you’re eligible for the full amount) plus any additional refund the IRS owes you.
What are the Biggest Changes for 2010?
Income Limits Increased
Besides the tax credit being extended until June 30, 2010, the income limits have also been increased. The new income limit for single filers is $125,000 (up from 2009 limit of $75,000) to receive the full credit of $8,000 in San Mateo County. If you make more than $125,000, your tax credit starts to phase out. If you make $145,000 or more (2009 max was $95,000), you are not eligible for the home buyer tax credit.
For married or joint filers, the income limits are set at $225,000 to receive the full $8,000 credit in San Mateo County. This is up from $150,000 in 2009. If you make more than $225,000, the credit begins to phase out up to $245,000 where you are no longer eligible to receive the credit.
2010 Income Limits to Be Eligible for Home Buyer Tax Credit
| Full $8,000 Credit | Partial Credit | Ineligible for Credit | |
| Single Filers | less than $125k | $125k-$145k | more than $145k |
| Married Filers | less than $225k | $225k-$245k | more than $245k |
Current San Mateo Home Owner’s Buying a New Primary Residence Now Eligible
Another change for 2010 is that the tax extension bill now offers an incentive for non first time homebuyers to purchase a new home in 2010. The max tax credit for homeowner’s buying a new primary residence is $6,500.
Who is Eligible for the Home Buyer Tax Credit?
You are eligible for the $8,000 home buyer tax credit if you are a first time homebuyer or somebody that has not owned a primary residence in the last 3 years. You would even be eligible for the home buyer tax credit if you own an investment property or a second home but have not owned a primary residence in the last 3 years.
If you currently own a home and buy a new primary residence, you would be eligible for the $6,500 tax credit if you have occupied your current primary residence for any 5 consecutive years during the last 8 year period.
What are the New Deadlines to Claim the Home Buyer Tax Credit?
The new rules and extension went into effect November 7th, 2009. To take advantage of the tax credit, you must have an accepted contract no later than April 30, 2010 and close your transaction by June 30, 2010.
If you’re a member of the Military, Foreign Services or Intelligence Agency, you will be eligible for a 1 year extension if you were out of the country for at least 90 days between December 31, 2008 and May 1, 2010. With this extension in place, you must have an accepted contract dated no later than April 30, 2011 and close your transaction before June, 30 2011.
Does the Home Buyer Tax Credit have to be Repaid?
The home buyer tax credit does have a repayment trigger if you sell your home within 3 years of buying it. If you sell in the first year, the entire tax credit must be repaid and there is a partial repayment for years 2 and 3. If you live in the home longer than 3 years, you will not have to repay the credit.
Stay Tuned for Part II of the Home Buyer Tax Credit FAQ’s
These are the first 5 of the most basic frequently asked questions by San Mateo home buyers. In my next post I will complete the top ten list and cover some more specific questions from individuals.
Have Specific San Mateo Mortgage Questions?
In the meantime, if you have any additional questions regarding the home buyer tax credit, or if you want to see how the tax credit affects you as a San Mateo home buyer, give me a call at (650) 520-0915 or send me an email at info@SanMateoMortgageBlog.com.
Considering Buying a Home in San Mateo County?
Call me at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com to schedule a free, no obligation in person or phone consultation to examine your finances and help you determine how much you can afford.
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
Related posts:
- Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part II
- Slide Show – Guide to the Extended and Expanded Home Buyer Tax Credit
- How to Claim the Home Buyer Tax Credit
- Federal Home Buyer Tax Credit Not Just for San Mateo First Time Home Buyers Anymore
- California’s New Home Buyer Tax Credit
