What San Diego Homebuyers Need to Know about the Recent Tax Credit Extension

The popular first-time homebuyer tax credit that was scheduled to end in November 2009 has been extended. President Barrack Obama signed legislation that extends the deadline on the first-time home buyer tax credit and adds a smaller tax credit for other home buyers. For example, if you are looking to buy your first home in Carmel Valley, the bill extends the up to $8,000 tax credit for first-time homebuyers for seven months. If you own an existing home in La Jolla, a $6,500 tax credit may benefit you if your primary residence has been owned, used, sold, or is being sold within at least five consecutive years of the previous eight years.

The extension and expansion gives home buyers a tax incentive to buy a home until at least April 30, 2010. For qualifying military personnel the deadline is April 30, 2011. The extension of the first-time home buyer tax credit will help clear out unsold inventory, especially bank owned inventory that has yet to hit the market.

California Association of Realtor studies tell us that for more than 75 percent of home buyers this year, the tax credit was very important and more than 40 percent of the home buyers would not have been able to buy without the credit. A new tax credit of up to $6,500 is available to qualifying existing homeowners who buy a new primary residence (or have one built) by April 30, 2010, if they owned their existing home for five consecutive years over the last eight years. Second homes don't qualify for the credit.

Home buyers have to repay the credit if they live in their primary residence less than 36 months and are not members of the military. The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, from the current $75,000 and $150,000. The maximum allowed home purchase price is $800,000, which may not be as useful to move-up buyers in high-cost areas such as Del Mar.

Both first-time home buyers and others must contract to buy a home by April 30, but close escrow by June 30, 2010. Buyers can claim the credit on their 2009 taxes, even if the purchase is made in 2010 by filing an amended return. Buyers who don't owe taxes can have the credit refunded to them as a rebate. For San Diego residents, more information is available online from the Internal Revenue Service (IRS}, including a question and answer page.

It's all good news for the housing market. The National Association of Realtors says as many as 400,000 resale transactions (1.2 million for both new and resale homes) were completed specifically because of the first-time home buyer tax credit, since it began, and that put a dent in the housing inventory. Home sales also add property and sales tax revenues to the coffers of local governments as reduced inventory helps boost prices and home values.

If you’re thinking about selling or buying a new home please contact Nick Alameddin at Nick@mypfgroup.com , or call 760.802.4166.