Why is the Federal Government Offering an $8000 Tax Credit?
Everyone is aware of the economic crisis that our country has been going through in the last couple of years and most people agree the cause of this crisis was the housing market. Sub-prime mortgages funded in 2003 through 2005 that went into default caused many lenders and mortgage backed securities to crash and go bankrupt. This crash filtered down to every sector of the economy and caused home values to tumble as well and inventory levels increased with all the foreclosures that were filed. The Federal Government, as part of The American Recovery and Reinvestment Act of 2009 authorized an $8000 tax credit on a primary residence for first time buyers who purchase between Jan 1 2009 and April 30 2010 and now has been extended and expanded to include move up buyers as well. This tax credit is expected to stimulate buyers to purchase a home and decrease the inventory currently on the market which in turn will help values recover quicker.
Who Qualifies for the Tax Credit?
First time buyers who purchase a primary residence, new or resale, between Jan 1 2009 and April 30 2010 will qualify for the credit. Also there is a $6500 credit available to move up, or current homeowners. The closing must take place between those dates. A first time home buyer is defined as any individual who has not owned a principal residence in the three years prior to the purchase. For married couples the law will look at both husband and wife’s home ownership history. A current homeowner must have lived in the same residence for 5 of the last 8 years to qualify.
How Much Credit Will I Get?
The amount is determined by the sales price and is 10% of that price up to $8000 for first time buyers and $6500 for current homeowners.
Are There Income Limits or Other Limitations?
There are income limits associated with this tax credit. The income limit for single tax payers is $75,000 and for married couples filing jointly it’s $150,000. To get more specifics about these limitations please consult your tax accountant or go to www.Realtor.org.
What’s the Difference Between this Credit and the One Issued in 2008?
The difference is this current credit does not have to be paid back! That’s right this is a true credit and not a loan against your tax return.
How Do I Collect My Tax Credit?
You can file it on your 2009 return or if your closing is after you file you can file an amended return. Your tax preparer can tell you how to do both and will advise what you will need to submit to do so.
Can I Use My Tax Credit at Closing?
The Secretary of HUD has recently announced they will allow lenders to apply the anticipated tax credit towards buyer’s closing costs and pre-paids in the form of a bridge loan (short term loan). This means that buyers needing the money up front will be allowed to use it to play closing costs and buy down mortgage rates. This money will not be allowed to be used for the 3.5% down payment required by FHA but can be used for any amount over the required 3.5%.
