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Homebuyer Tax Credit - Revised 11-06-09
As part of the REVISED Housing and Economic Recovery Act of 2008, extension to the Home Buyer Tax Credit has been APPROVED and IMPROVED!
First-time home buyers have been eligible for tax credits of up to $8,000 since last January as part of this year's economic stimulus package. The newly backed program will expand the credit to include existing home owners...
In this section we’ll discuss some of the provisions of the credit and explain how to use it.
Am I Eligible?
First ‐time homebuyers who are purchasing a principle residence, must sign a purchase agreement by April 30, 2010 and close by June 30th are eligible. If you (and your spouse, if married) have not owned your principle residence for a 3‐year period before your purchase, and you have never taken advantage of the first‐time homebuyer credit, you qualify as a first‐time homebuyer.
The tax credit is also set to be extended for another year for military personnel serving outside of the United States until June 30, 2011.
Also under the revised program, those who have owned a home for at least five years will be able to apply for tax credits of up to $6,500 when they purchase their next home.
The maximum purchase price on a home will be $800,000 with vacation homes not eligible.
How does it work?
Like all tax credits, it will directly reduce the total amount of taxes you owe. When you file your taxes, for the year you purchased your home (2009 / 2010), you will be able to subtract the amount of the credit from your Federal income tax liability, increasing the size of your refund or reducing the amount you owe. For example, you file your ‘normal’ tax return and find that you owe $1,500 in taxes. With this credit, your tax liability could be lowered by $8,000 ~ which means instead of owing, you would get a $6,500 tax REFUND check from the IRS.
How big is the tax credit?
The tax credit is equal to 10% of the purchase price of your home up to $8,000. The full credit is available for single individuals whose adjusted gross income is no more than $125,000. Married couples filing jointly, to receive the credit must have an adjusted gross income of no more than $225,000. (This has been increased from the previous thresold of $75,000 for individuals and $150,000 for married couples)
What about Repayment?
The tax credit is money for yours to keep as long as you live in your home for 3years.
If a qualifying home is resold before 3 years the credit is repaid, the seller will have to immediately pay the the credit. If the home is sold at a loss, then you owe nothing back.
Are there other conditions I should know about?
• Purchases by non‐resident aliens and purchases financed by proceeds from a qualified mortgage issue are not eligible.
• Any single family residence located in the United States that will be used as a principal residence is eligible. - That includes single‐family detached housing, condos or coops, townhouses or any similar type of new or existing dwelling.
• The credit will not result in an individual owing additional federal taxes under the Minimum AlternativeTax.
• Home purchases between relatives and other gifts of residences are not eligible for the credit.
• Other tax benefits of homeownership are still in place. Mortgage interest deduction, capital gains tax exclusion, and property tax deduction are some well‐known examples.
For more specific questions about the tax implications of the credit, please consult a tax professional.
Buying a home is a big step!
Buying a home is a big step. Fortunately, trained professionals like myself are willing and able to help you through the process. In addition to the many benefits of homeownership, the homebuyer tax credit, interest rates are still at historic lows, and more affordable prices make now an especially opportune time to purchase.
Still, the commitment is a substantial one, and I strongly encourage you to ask questions and be informed about the decision you are making so that the home you buy is a home you can enjoy for years to come.
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