TAX CREDIT UPDATE

On Nov. 6th 2009, President Obama signed a new bill that extends the tax credit for first-time home buyers (FTHB) to June 30th, 2010. This credit is for $8,000 or 10% of the new home if purchase price is below $80,000.

Who is Eligible for the FTHB Tax Credit?

Someone who has not owned a home within the last three years is considered to be a First-Time Home Buyer. So anyone who has not owned a primary residence in the last 36 months, prior to closing and the transfer of title, is eligible. This applies to both single tax payers and married couples. Now married couples where either spouse has owned a primary residence in the last 3 years would NOT qualify for the credit. But if an individual owned an investment property or second home, that individual WOULD be eligible.

What About Current Home Owners Planning to Move?

This bill also includes incentives for Current home owners who are about to purchase a new primary residence. A tax credit for $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Now in situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What Are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible. Any home purchase price over $800,000 is not eligible.

What are the other restrictions to getting the FTHB tax credit?

According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

* They buy the home from a close relative. This includes a spouse, parent, grandparent,    child or grandchild.
* They do not use the home as your principal residence.
* They sell their home before the end of the year.
* They are a nonresident alien.
* They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
* Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
* They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Homebuyers who purchase a home from a Step-Relative are eligible for the credit. As long as the person they buy the home from is not a direct blood relative. Also, if a parent (who will not live in the property) cosigns for a mortgage, the child will be eligible.

WHAT CAN I DO TO TAKE ADVANTAGE OF THIS OPPORTUNITY?