The President signed the legislation to expand the first time home buyer tax credit to include current home owners on Friday 11/6. Here is some basic information about the credit.
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 eligible?
Someone who has used the home being sold or being sold as a principal residence consecutively for 5 of the previous 8 years. The home being purchased must cost $800,000 or less. You must close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract by April 30, 2010 and close by July 1, 2010.
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 $6,500. 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 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®.