First -time Homebuyer Federal Tax Credit Update

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Going once, going twice, almost gone!

This is the third time round for this Homebuyer tax credit.  This time on November 7, 2009 Congress legislated this credit will expire April 30th, 2010.  Unlike the two previous rounds, this one includes current homeowners, not just first-time buyers. 

Who qualifies?

First-time homebuyers (the purchaser or his/her spouse may not have owned a residence during the three years prior to purchase) can qualify for up to a maximum $8,000 in tax credit.  Existing homeowners (who have owned their current home for at least five consecutive years within the last eight) can qualify for up to $6,500 in tax credit.

The best news is that allowable income limits, a road block in prior credits, have increased over previous programs.  The Extended Tax Credit program caps income at $125,000 (in order to receive the maximum tax credit) and $225,000 per year for couples, the latter up $75,000 over the previous program. The credit decreases as you reach the maximum limits of income qualification.   As always, consult your tax professional regarding your individual situation.

This is limited to eligibility for primary residence (not second homes or investment properties) priced at $800,000 or less.  Primary residences include single family homes, condos, townhomes and co-ops.  Remember we have lots of great co-ops in Long Beach.

Guidelines you need to know..

DEADLINES

1) Close on your home purchase between November 7, 2009 and April 30,2010 or have a binding written contract by April, 2010 and close by July 2, 1020.  2) Decide whether to apply the credit to your 2009 tax return, filed on or before April 15, 2010, File an amended 2009 return; or, apply the credit on your 2010 return, filed on or before April 15, 2011.

TO APPLY THE CREDIT TO YOUR 2009 TAXES

You need to do three things: 1) Fill out Form 5405 to determine the amount of your available credit 2) Apply the credit when you file your 2009 tax return or file an amended return 3) Attach documentation of purchase to your return or amended return.

TAX CREDIT REPAYMENT

There is no repayment required on the extended homebuyer tax credit if you occupy the home for 3 years or more; should you sell prior to that tie the full amount of the credit will be recouped on the sale.

MOVE UP BUYERS

While beneficial for first-time homebuyers, this extended tax credit program is a coup for would-be move-up buyers.  With inventory shrinking, it's a great time to list/sell your home and free-up your equity while being able to take advantage of affordable purchasing your next home at low-level market prices - with money back from Uncle Sam!!

It's highly unlikely we'll see market conditions, tax credits, interest rates, and inventory supply like these again - my suggestion - get on the bandwagon and don't be left behind.  For more information or to talk about this program give me a call, I'm happy to help.