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First Time & Repeat Buyers Get a Better Tax Break
New Legistation
New legistation, the Worker, Homeownership, and Business Assitance Act of 2009, was signed into law on November 6, 2009, extends and epands the first-time homebuyer credit allowed by previous Acts.
The New Law
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Extends the deadline for purchasing and closing on a home.
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authorizes the credit for long-time homeowners buying a replacement principal residence.
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raises the income limitations for homeowners claiming the credit.
Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.
General Information
Homebuyers who purchased a home in 2008 or 2009 may be able to take advantage of the expanded first-time homebuyer credit. The credit:
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Applies only to homes used as a taxpayer's principal residence.
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Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
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Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
Notice: The content of this information is intended only for informational purposes and shall not be contrued or accepted as legal or tax advice. For questions regarding the qualification for the tax credit and the amount of the tax credit, you should consult a tax advisor. This message and its entirety can be found at www.irs.gov
Unlike the original 1st Homebuyer Credit, this is money individuals do not need to pay back. The internal Revenue Service has posted (on IRS.gov) a revised version of the explanation of the tax credit along with the Form 5405 click here .
Who Qualifies for the Extended Credit?
- First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
- Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
Which Properties Are Eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How Much Is Available?
The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.
How is a Buyer's Credit Amount Determined?
Each home buyer’s tax credit is determined by tow additional factors:
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The price of the home.
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The buyer's income.
Price
The Extended Buyer Tax Credit, credit may only be awarded on homes purchased less than $800,000.
Buyer Income
Under the newer Tax Credit, effective 11/7/09, single buyers with incomes up to $125,000 & married couples with incomes up to $225,000—may receive the maximum tax credit.
If the Buyer(s)’ Income is Greater Than the Maximum Limits,
Can we still get a Credit?
Yes, some buyers may still be eligible for the credit.
The credit decreases for buyers who earn between $125,000 & $145,000 for single buyers & between $225,000 & $245,000 for home buyers filing jointly. The amount of the tax credit decreases as your income approaches the max limit. Home buyers earning more than the max qualifying income—over $145,000 for singles & over $245,000 for couples are not eligible for the credit.
Can a Buyer Still Qualify If He/She Closes 4/30/10?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for 3 yrs or more. However, if the property is sold during this 3 yr period, the full amount credit will be recouped on the sale.
Scenario examples of who may qualify:
• Tom owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.
• Mary purchased a home in 2004 & has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.
• Linda purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.
• Scott purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.
If you are thinking about purchasing a home, don't wait. Now is the best time, especially if you are a first-time home buyer (meaning you have not owned a home in 3 years).
Part of the economic recovery plan includes a dollar-for-dollar tax credit of up to $8,000 if you purchase a home January 1, 2009 to June 30, 2010. This is a CREDIT, not a deduction. That means that the amount of taxes you would owe the IRS for year 2008 or 2009 or 2010 are decreased by that amount. Below are some of the basic highlights of the tax credit and here is a link to the IRS web page with detailed information.
http://www.irs.gov/newsroom/article/0,,id=204671,00.html
Always Ask Your Tax Professional For Advice
First-Time Homebuyer
Tax Credit 
The 2008 tax credit provision are outlined below:
Amount of the tax credit (free money) - 10% of the purchase price or $8,000 which ever is less
Who's Eligible? - First-time homebuyers purchasing a principal residences only
Income Limits - $75,000 for an individual; $150,000 for a couple
Expiration Date - Eligible buyers must purchase the home between January 1, 2009 and April 30th, 2010. Transactions closed on or after July 1, 2010 will not qualify.
Repayment - The credit does NOT have to be repaid if the property is not sold or rented in the first three years.
NOTICE: I am not a tax professional, this information is provided as general information and not intended to take the place of advice from your tax professional or accountant.
First-time Homebuyers
Your decision to buy a home is both a sound financial decision and a commendable achievement. As your Certified Mortgage Planning Specialist . . .
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I will find the best loan for you. Contact me today! Hurry! Time is a Wasting.
Stimulus Funds Now Available
for Down-Payments
A new twist to the nation's economic stimulus program may make it easier to turn an $8,000 tax credit into a first-time home.
Under a decision announced in mid-June, the U.S. Department of Housing and Urban Development (HUD) will allow eligible first-time homebuyers to use the tax credit authorized under The American Recovery and Reinvestment Act of 2009 during the actual home purchasing process. This will help to eliminate a major stumbling block for many homebuyers - coming up with the cash for a downpayment and closing costs.
As originally envisioned, the $8,000 credit would be available only after home buyers who purchase a home before next December 1 actually owned the home and filed their tax returns. They would then have to wait for the resulting refund. The credit could be claimed on either 2008 or the 2009 return but would still be available only retroactively.
The HUD policy change will permit FHA-approved lenders such as federal, state, and local government agencies and non-profit organizations to provide loans against the potential tax returns at closing to qualified buyers who are financing the purchase through FHA guaranteed first mortgages.
So far, Housing Finance Agencies and other development agencies in 10 states have announced programs under the new HUD guidelines and it is expected that many more will follow suit.
Each participant is free to structure its program but there are some general similarities. Most take the form of a second mortgage and a payoff is expected when the tax return is received. In Colorado, for example, the loan can be for an amount of up to 3.5 percent of the first mortgage loan or $6,000 (whichever is less) and will carry a 0% interest rate until June 30, 2010. There is a $350 administrative fee for issuing the loan, but if the loan is paid by the June 30 date $250 of the fee will be applied toward the payoff. After that date the interest rate will rise to 8% and the loan will amortize over eight years.
In Idaho the loan can be for as much as $7,000 if it does not push the indebtedness over 100 percent loan to value. To qualify the first-time buyer must have a FICO score of at least 640 and the debt ratio cannot exceed 45 percent. A loan from the Idaho program has a 3 percent interest rate.
A list of participating states and information on the program specifics in each state are available on the website for the National Council of State Housing Agencies at www.ncsha.org (click on "FHA First Time Homebuyer Tax Credit Loan Program.)
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