(The following article was suggested to me by one of my favorite PHDs.)
As if tax season weren’t stressful enough, prospective home buyers have two more looming deadlines to contend with. Both are related to the federal government’s homebuyer tax credit. In a nutshell, the federal government is paying consumers (up to $8000) to purchase a home. You need to get on your horse though. Purchase agreements (i.e. being in contract) need to be signed by April 30, 2010, and you need to purchase your home (i.e. close) by June 30,2010.
One word of caution. If you intend on taking advantage of the credit, don’t wait until April 1st to start shopping. There is liable to be a feeding frenzy at that time which could artificially push prices higher, and nullify the value of the credit.
Here are the facts:
The Tax Credit applies only to the purchase of a primary residence (i.e. home) where the purchase price is $800,000 or less. The home cannot be purchased from a direct relative (i.e. parents, grandparents, siblings, or children).
First-time homebuyers are defined as people who have not lived in a home they own for the previous three years. For first-time homebuyers, the tax credit applies to 10% of the purchase price up to a maximum amount of $8000.
Repeat homebuyers must have owned their current home for at least five years or have lived in the same home for five consecutive years over the last eight. For repeat homebuyers, the tax credit applies to 10% of the purchase price up to a maximum amount of $6500. Notably, the new law does not require that you sell your current residence.
Single taxpayers with annual earnings of $125,000 or joint filers with annual incomes of $225,000. (Single homebuyers with incomes between $125,000 and $145,000 and married homebuyers with incomes between $225,000 and $245,000 will be eligible for a reduced credit).
You must have a signed contract by April 30, 2010 and your transaction must close by June 30, 2010. This deadline is extended to April 30, 2011 for members of the military who have served outside the United States for at least 90 days between Jan 1, 2009 to May 1, 2010.
Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds the amount of tax owed, the difference is paid in cash – even if the taxpayer owes no tax!
Thanks for reading.
For additional information (of both the detailed and confusing kind) have a look at the IRS websites below: