The President signed the legislation to extend the first time home buyer tax credit on Friday 11/6. There are a few changes and this is different from the 2008 first time home buyer tax credit. Here is some basic information about the credit which includes the changes and the extension.
What is a tax credit?
A tax credit differs from a tax deduction in that the amount of the credit is deducted from the amount of tax you owe. A deduction reduces that amount of income which is subject to tax. In the case of this first time home buyer tax credit, if the amount of the credit is greater than the amount you owe, then you will be sent a refund check for the remaining amount of the credit.
Who is a first time home buyer?
Someone who has not owned a principle residence, a home they have lived in, for at least three years previous to the purchase of a home this year.
What type of home can I buy?
Single family homes, town homes, and condominiums all qualify.
What is the amount of the credit?
The credit amount is 10% of the cost of the home up to a maximum of $8000. Income limits do apply. The credit phases out for individuals with an adjusted gross income over $125,000 or a couple with an adjusted gross income over $225,000.
When do I have to purchase to get the credit?
You must purchase a home between January 1, 2009 and have a written binding contract to purchase a home by April 30, 2010. The purchase must close by July 1, 2010. If you purchase a home after November 6, 2009 the maximum price of the home can be $800,000 in order to qualify for the credit.
Does the credit have to be paid back?
This credit does not have to be paid back for people who purchase between January 1, 2009 and the July 1, 2010 closing deadline unless the home is sold within three years and then the entire credit us due upon the sale of the property.
When do I get the money?
This is a tax credit. You will not get the money when you buy the house. Instead the credit will be applied to the taxes you owe for 2009 or 2010 depending upon when you purchase and how you file.
There some additional rules that apply. If you would like more information, please send an email requesting the information to Pat@RealtySecrets.net.
Consult an Accountant
Tax laws are complicated and each year there are new changes; therefore, we always recommend that you consult your accountant or the IRS regarding any tax questions that you might have including whether or not you qualify for this tax credit.
Source: National Association of REALTORS®.