New tax credit may be worth pouncing on

By Kenneth R. Harney
Saturday, November 14, 2009

Take a close, hard look at the new $6,500 federal tax credit for "move up" home buyers that passed the Senate and House last week. Though it's been getting second billing to the original $8,000 credit for first-time purchasers -- now extended by Congress through June 30 -- the $6,500 credit for current homeowners just might have your name on it.

How does it work? When will it be available?

First things first: The new credit is available now. It took effect Nov. 6, the day President Obama signed the legislation. This means that if you fit the key criteria -- you've owned and resided in your current home for a consecutive five out of the past eight years, and your adjusted household income doesn't exceed $125,000 if you file taxes singly, $225,000 if you are married filing jointly -- you can claim the credit as soon as you close on a qualifying home.

That could be next week, next month or next spring. There is no actual move-up requirement in the new credit. In fact, homeowners who plan to downsize may prove to be significant users of the credit, along with people who are relocating because of employment changes.

If you fit the criteria and are considering buying another home sometime in the coming year, you might want to speed up the process and sign a contract by April 30 and close by the June 30 expiration date. Think of it this way: If the government is willing to give you $6,500 to act a little faster than you had originally planned, hey, why not?

Some other key features of the $6,500 credit:

-- Whatever you intend to purchase, the home cannot cost more than $800,000.

-- The replacement home must become your main residence. There is no requirement in the legislation that you sell your current home. You could rent it out, turn it into a second home or list it for sale later in 2010 when prices might be higher. If you plan to retain it, however, make sure you move into the new house on the day you close so that there is no question it was your principal residence at that time.

Visit www.winchesterhomes.com to find out how you can take advantage of the $6,500 credit, whether you are moving up or moving down. Winchester Homes has a great selection of tax credit single family and townhomes in Maryland and Virginia.