Q: What is a “Repeat Homebuyer”?
A: Under IRS rules, you must have owned and occupied a home as your principal residence for at least five of the eight years immediately preceding your qualifying purchase. Your qualifying five-year residence must be your most recently owned principal residence, meaning you may not have owned an intervening residence for less than five years and still qualify. Your repeat purchase must be made between Nov. 6, 2009 and April 30, 2010. If you have a valid purchase contract by April 30, you may close as late as May 31, 2010.
Q: If I live in a rental house in Atlanta, but have owned a vacation home at the beach for many years, will that qualify?
A: No, because the vacation home is not your primary residence. Your "principal residence" is usually the one where you spend the most nights per year, but there are other factors the IRS may consider, such as where you register to vote and the address on your drivers license.
Q: Does my replacement residence have to be a traditional house?
A: Not necessarily. A condo or townhouse could qualify, as could a boat, a motor home, or even a trailer. It must have a kitchen, sleeping quarters and bathroom facilities.
Q: I heard that I am required to reside at the replacement residence for at least 3 years. What happens if I have to move?
A: The amount of your entire tax credit will be added to your federal income tax liability in the year that you move. In other words, you have to give it back.
John Adams is a broker and investor. He answers real estate questions on radio station WGKA (920 AM) every Saturday at noon. For more real estate information or to make a comment, visit www.money99.com
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