First Time Homebuyer Tax Credit
by Garach Smith
(Missouri)
The Worker, Home ownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. It also authorized a tax credit of up to $6,500 for qualified repeat home buyers. This is great news if you are a first time home buyer or qualify for the $6,500 repeat buyer credit. If you are renting, you should really take advantage of this opportunity and purchase your first home! The $8 000 first time homebuyer tax credit makes this decision a slam dunk. First of all, there are still some crazy deals out there where you can buy houses for 20-30% below value. Add in the $8,000 first time homebuyer credit and you can have some awesome equity!
This is also a great opportunity for investors who have some houses for sale that you need to turn. But be aware- this tax break will end April, 30 2010. Here is an out line of the two programs
First Time Homebuyer Tax Credit
1. It must be your principal residence.
2. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
3.For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.
4. The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.
$6500 Tax Credit for Repeat Homebuyers
1. The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. That is, both spouses must qualify as long-time residents, with at least five years of principal residency for each. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
2.The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.
3. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
Here are two links to websites that can further answer any questions you have.
http://www.federalhousingtaxcredit.com/
http://www.irs.gov/newsroom/article/0,,id=204671,00.html
I don't know what to expect in the real estate market after April 30th. If you are renting or are an investor trying to sell a house, there is no better time than the present to take advantage of this. We will just have to wait and see what happens next. My prediction is that we will go through some down months in real estate until some other catalyst spurs the market higher. Perhaps congress will enact another tax credit for homebuyers. Otherwise, we could see some terrible real estate sales in the third and fourth quarter.
