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RISMEDIA, November 6, 2009 President Barack Obama has approved the first-time homebuyer tax credit extension which will extendthe tax credit until April 30, 2010.
The extension is part of a $24 billion economic stimulus bill that will extend the $8,000 tax credit for homebuyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to homeowners who have lived in their current home for at least five years and are seeking to relocate.
The following details apply to the homebuyer tax credit expansion:
Who is Eligible
First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
- Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal
- All U.S. citizens who file taxes are eligible to participate in the program.
residence ("repeat buyer"), may be eligible for up to a $6,500 tax credit.
Income Limits
Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
- For married couples filing a joint return, the combined income limit is $225,000.
- Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
- he credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
Effective Dates
- The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.
Types of Homes that Qualify
- All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.
Tax Credit is Refundable
- A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
- For example:
- A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
- A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
- All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return.
Payback Provisions
The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.
You may receive the $8000 credit even if you have not paid $8000 in taxes, and the $8000 does not have to be paid back as long as you occupy the home for at least 3 years.
(For those who are still not clear on this.. if you were getting a $200 rebate on your taxes, that would jump to an $8,200 rebate.) In order to qualify, you must purchase the home to be used as your primary residence.
This information is general in nature, and it is always best to call a tax specialist for details. If you are a first time home buyer, or have not owned a primary residence in the past 3 years, you may not get another opportunity like this! There are three dyanmic factors working in your favor at this point in time!
1) The interest rates are at all time lows, allowing you significantly lower monthly payments!
2) Bank owned properties are available at great prices!
3) The $8000 tax credit from Uncle Sam is now availble for a few short months! Don't let this opportunity pass you by!
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