The media has given a lot of attention to the $8000 first time home buyer credit. With this credit, thousands of people have flocked to buy their first home. With a tax credit, you get a dollar for dollar reduction in the amount of money that you owe the government. Therefore, this is a very valuable thing to have when you file your taxes. While this tax credit has received a lot of attention, a new tax credit along the same lines was recently passed in Congress. This credit is often referred to as the move up tax credit and it is designed for a different set of Americans. Here are the basics behind the move up credit and how it works.
In order to qualify for this new tax credit, you have to meet certain requirements. For one thing, you have to have lived in your house for 5 consecutive years out of the last eight years. Therefore, if you have just purchased your house, you would not qualify for this credit. This will eliminate much of the population, but it aids those that have been in their house for a number of years.
In addition to the time requirement, you have to meet certain income requirements as well. If you file your taxes individually, you can not make more than $125,000 per year. If you are married filing jointly, you have to make less than $225,000. Therefore, the only people that would not qualify for the tax credit are in the higher income brackets.
In addition to your personal requirements, the new home has to meet certain requirements as well. For one thing, the house that you buy can not be valued at over $800,000. This obviously should not affect the vast majority of people in the United States. In addition to being below $800,000, the house has to become your primary residence. Therefore, as soon as you buy the house, you need to move into it right away. If there is any question about where your primary residence is, you may not qualify for the credit.
Nowhere in the bill does it say that you have to sell your existing house. If you want to, you can rent out your original house or do nothing with it. The only thing you have to do is meet the requirements and buy a new house.
Even though the credit is called the move up credit, you do not necessarily have to move up to a bigger or more expensive house. There are no restrictions on the price of the house you buy. Therefore, you could actually downsize if you wanted to and still receive the credit. There are a number of property types that can be used for this credit as well.
The tax credit is in effect now, so if you have been thinking about buying a house, you are free to do so. In order to get the credit, you have to have entered into a contract by April 30th and close by June 30th.
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