I am finding that many people still are either unsure about the new tax credit information or don’t even know about it…especially that it isn’t just for 1st time buyers anymore.

Since 11/09 when the government extended the 1st time buyer tax credit AND expanded the program to include other buyers as well, for up to $6,500, I wanted to educate my clients to help  determine if going under contract before the 4/30/10 deadline is the right decision for you.

Just a basic definition of a tax credit…this is a figure that directly comes off the bottom line of your tax return, off the amount you owe the government. This is after tax dollars.

There are many details of the program, so if you believe you would like to purchase at this time and benefit from this tax credit, please consult a tax attorney or your accounting professional. The summary I am providing you on this website is just that…a concise summary of the guidelines.

Tax Credit Information

Basics of the Program
The American Recovery and Reinvestment Act of 2009 includes a provision for qualified first-time U.S. homebuyers to receive a tax credit of up to $8,000.

In November 2009, the provision’s deadline was extended and the credit was expanded to give most other homebuyers a tax credit of up to $6,500.

The credit amounts to 10 percent of the purchase price up to the credit limit. So a home purchase of $80,000 or more would be good for the full $8,000 credit for “first-time” buyers; and a home purchase of $65,000 or more would be good for the full $6,500 credit for qualifying “repeat” buyers.

No credit is available for home purchases that exceed $800,000. The credit never has to be repaid, provided that the buyer continues to own and live in the home as a principal residence for a minimum of three years straight.

Under the deadlines revised in November, buyers must have a written, binding contract in place before May 1, 2010 and close before July 1, 2010.

Note: As with any tax legislation, the details can quickly become complex with individual filers’ unique situations. I cannot provide tax or legal advice. Please confirm eligibility and pursue filing questions directly with the IRS or their own tax professional.
Program Details

• An individual qualifies as a first-time buyer if neither he nor she, nor their spouse, owned a principal residence in the United States in the three years prior to closing. 
• An individual qualifies as a repeat buyer if he or she, or their spouse, owned and lived in a principal residence in the United States for five consecutive years within the eight years prior to the closing date. 
• Even if a co-borrower (or someone providing help with the down payment) is ineligible for the credit, the otherwise qualified buyer remains eligible – meaning a parent can help a child (nondependent and at least age 18) buy a home – and the child can receive the credit.
• Buyers can receive the full credit even if they don’t owe any taxes for the year in which they file for the credit.
• There are income restrictions, which were revised upward with the November modification. The full credit can be taken by individual filers with Modified Adjusted Gross Incomes up to $125,000 and joint filers up to $225,000. The credit phases out after that and is eliminated at $145,000 for individuals ($245,000 for joint filing). Be aware of the distinctions between Adjusted Gross Income, Modified Adjusted Gross Income and Taxable Income. This IRS Web page has details on calculating Modified Adjusted Gross Income.

I encourage clients to consult the IRS, IRS Web site or a tax professional.