The Tax Credit for First Time Homebuyers was amended this week when President Obama signed it into law along with the stimulus package. Here are the basics for understanding how this can help you with your home purchase.
Below is a Summary, along with a chart provided by the National Association of Realtors.
1. A First Time Homebuyer is someone who has not purchased a primary residence in the last three years. If you have owned a home but sold it over three years ago, you would qualify. Check with your accountant to see if second homes or vacation homes would disqualify you.
2. The Federal First Time Homebuyer Tax Credit is now $8,000 or 10% of the value of the home. This means that any house over $80,000 in value would qualify for the full tax credit.
3. Homes purchased between Jan. 1, 2009 and Dec. 1, 2009 qualify for the tax credit.
4. You have to buy the home first, including whatever downpayment and closing costs that are involved. Then, when you file your taxes, you will owe less, which will be a credit.
5. Say you owe $5,000 in taxes. You would receive a $5000 tax credit. If you owed $8000, the credt would be $8000, etc.
6. Only Primary Residences are eligible (no second homes). Your Primary home could be a single family home, townhouse or condo.
7. Move within three years? You have to pay back the incentive. (I know you're wondering about proration; don't know the answer to that yet, still checking). If you live in the home three years or more, the creditis all yours, no payback.
8. As with any government program, there are income guidelines: $150,000 for a married couple, $75,000 for a single person.
9. If Buyers want to use this as a downpayment, they could check with their accountant to see if it was advisable to withhold less taxes this year, buy the house prior to Dec. 1, then file 2010 taxes early next year to receive the credit for 2010 quarterly taxes.
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I thought I know all that, but turned out I learned something new. About 3 years, and losing incentives if disposing of the property earlier, and that there might be an option to use that money towards downpayment.
I am not good with this stuff anyway, biut now I know what my client needs to ask her accountant. Thanks
Sharon there are plenty of folks who are still in the dark about the stimulus package. Nice work keeping your readers posted.
Jon - There are details that you don't hear about in the news sound bites. Of course, buyers should check with their accountants about tax withholding, but I did read that in an article somewhere.
Bill - There is so much information coming out - why last week we thought it was going to be $15,000! That's why posting the NAR sheet makes sense. Thanks :)
Good info, but re-check you math on the tax example (Item 5 in your list). With $8000 credit and 5000 taxes owed you still get a $3000 REFUND.
Thanks, T. You are absolutely right. That's why I was an English major instead of a math major :)