What is the Longtime Homebuyer Tax Credit
The longtime homebuyer tax credit was a federal income tax credit available to homebuyers who had owned and lived in the same principal residence for five of the last eight years before the purchase of their next home. In order to qualify for the credit, most homebuyers would have had to sign a binding sales contract for the home before April 30, 2010 and close on the purchase before June 30, 2010.
Tax Deductions Vs. Tax Credits
BREAKING DOWN Longtime Homebuyer Tax Credit
The longtime homebuyer tax credit was enacted by the government alongside other similar homebuyer tax credits, including the first-time homebuyer tax credit, to bring new buyers to the housing market. The government hoped the credits would increase demand and stabilize falling housing prices. By most accounts, the credits were successful in increasing home sales and median prices. Critics of the tax credit believe that this subsidy artificially inflated home prices and acted as only a temporary support for falling prices.
The first-time homebuyer tax credit was a refundable tax credit made available to Americans purchasing their first home. The credit originally applied to home purchases made by qualified first-time buyers between April 9, 2008, and July 1, 2009. However, the Obama administration extended the original time frame requiring homeowners to have a signed sales contract until May 1, 2010, and gave them until the end of June 2010, to close the transaction.
The original tax credit implemented a credit of 10 percent of the home's purchase price, up to $7,500, which had to be repaid over 15 years in equal installments. However, the expanded version of the tax credit increased the maximum to $8,000 and removed the repayment requirement altogether, as long as the buyer stayed in the home for at least three years. Beginning November 7, 2009, long-time residents who owned their own homes also became eligible for the credit. The maximum credit for this group was $6,500, which, with some exceptions, did not have to be repaid. Long-time homeowners who bought a replacement home after November 6, 2009 or in early 2010 may have been eligible to qualify for a credit of up to $6,500 under the rules.
Longtime Homebuyer Tax Credits and Replacement Homes
Under a special rule, long-time homeowners who bought a replacement home after November 6, 2009 or in early 2010 may have qualified as well. To qualify as a long-time resident, taxpayers must have owned and used the same home as their principal residence for at least five consecutive years during a specified eight-year period.