Tag Archive for 'home buyer tax credit'

Today, Congress passed a measure to make the Home Buyer Tax Credit available to more people who meet income eligibility requirements, not just first-time home buyers. And those income limitations have been raised as well. See if you qualify for a tax credit under the new plan, and how to take advantage of it.

Congress has made the Home Buyer Tax Credit available for several more months and expanded it to make more people eligible. First time buyers will be able to get up to $8,000 if they get under contract to buy property before May 1st, 2010, and close on their purchase before July 1st. But that's not all.

You Don't Have to Be a First Timer Any More

Some buyers who aren't buying a first home are eligible as well, and can take up to $6,500 in tax credit if they beat the new deadline. The text of HR 3548 reads, "In the case of an individual (and, if married, such individual's spouse) who has owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence." So those who have owned their home for some time can also benefit from this provision.

The credit applies to the purchase of primary residences (not vacation or rental properties) costing $800,000 or less. The credit is phased out for individual taxpayers with annual incomes exceeding $125,000 and for joint filers with incomes exceeding $225,000. This is up from the old limits of $75,000 and $125,000, respectively.

What About Those Who Already Bought Homes?

Bill No. HR3548 does allow those who want to take the credit immediately to amend their 2008 tax returns and claim it. But can you claim the credit for purchases in 2008 or earlier in 2009 if you are eligible to claim it under the new bill but were not under the old? For example, what if a couple were first time home buyers last year, but their income at $200,000 a year exceeded the old thresholds? Could they amend their 2008 return and take the credit because they qualify today?

Probably not, if you carefully read the text of the bill as it will be submitted to President Obama for his signature. It reads: "EXTENSIONS- The amendments...shall apply to residences purchased after November 30, 2009."

So once again, those who didn't jump at the government's first offer got a better deal. Hopefully at least you will get to enjoy some home value appreciation as this credit fuels new home purchases and drives up home values in your area.

How Can I Take Advantage if I Qualify?

1. Don't let things go too long. Mortgage lenders like Bank of America had stopped accepting applications for purchases that needed to close by November 30^th. This extension should give them some breathing room, and allow those who are buying homes to have more lenders to choose from.

2. Shop carefully to get the best mortgage rates, and get yourself pre-approved as soon as you have chosen your lender. It's especially easy to do this online if you don't already have a trusted lender who you know can get the job done.

3. Make sure that your purchase agreement states that you have to close before July1st or you will not be obligated to go through with your purchase, or you want a $6,500 price refund at closing. It's best to have everyone--Realtor, lender, and seller--on the same page and working to get your purchase closed on time.

4. Document everything carefully, and keep copies of all your documents. The First Time Buyer's Credit has been plagued with fraudulent claims, and the IRS will be very careful about who it will allow to claim the credit. So be sure that you are eligible, and be prepared to prove that your claim is valid.

The new legislation has been designed to provide the housing market with a shot in the arm. Home purchases typically beget other purchases, such as furniture. Hopefully this will fuel the economy and even those who are not eligible can benefit in some way.

Many taxpayers - regardless of credit history - jumped last year to take advantage of a $7,500 tax credit for first time home buyers. The advantage of this credit was that it was refundable--even if you didn't owe $7,500 in taxes you got the whole credit. For example if you owed $2,500, your credit covered that debt and the government cut you a check for $5,000. The downside was that over a 15 year period, the credit had to be repaid.

Then, Congress passed the American Recovery and Reinvestment Act of 2009. This new bill increases the credit to $8,000 and that $8,000 doesn't have to be repaid. How does this new bill affect those who took the $7,500 credit?

Unfortunately, if you took the $7,500, you can't take the new $8,000 credit. And you still have to repay the $7,500 back over 15 years. But you don't have to start repayment for a couple of years, and the value of getting $7,500 at no interest for many years still comes to about $4,000. So while the $7,500 you got may not give you warm fuzzies, it's better than a sharp stick and still a good deal.

Now for those who have not bought a house yet, there may be all kinds of goodies available to you, depending on your income.

* Mortgage Credit Certificate Programs These create a tax advantage for first-time buyers. It's pretty much free money if you meet the IRS income guidelines and your home purchase doesn't exceed a predetermined amount. An MCC allows you to deduct your mortgage interest and adds a 20% tax credit towards your income tax liability. And the lender will deduct that credit from your house payment when calculating your debt to income ratios, qualifying you for a larger loan than you otherwise could.

* A refundable $8,000 credit for first-time homebuyers. And many folks who have owned property in the past still qualify for "first time homebuyer" status. Check here to see if you qualify. Here are the details:

· The tax credit does not have to be repaid.

· The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

· The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.

· Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

· If you have not filed your taxes yet for 2008 and you close on a home before you do so, you may be able to apply it on your 2008 tax return. Check with a tax pro for details.

* Rural Housing Programs You'd be amazed at what's considered rural by the USDA. Programs include zero down payment options for qualifying buyers in qualifying areas. And on February 1st, these rates dropped to 4.375%. Check out the details here.

So 2009 brings a lot of good reasons to buy a home. FHA and USDA lending guidelines are fairly liberal, and first timers can catch a lot of breaks from the IRS. When it comes to home buying, the US government loves newbies. Talk about beginner's luck.

You can start your search by contacting our database of new home loan lenders to request a mortgage prequalification letter from mortgage lenders; if you have a property in mind already, you can request up to four free competing mortgage quotes. If you already have a property, given current low market rates, consider requesting mortgage refinance quotes through our mortgage lender matching service. Good luck!