First Time Buyers! Move Up Buyers!
Get Your Tax Credit NOW!
Buy Now Before it Goes Away April 30, 2010!
Tax Credit for First Time Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of April 
2010 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income. The tax credit starts phasing out for couples with incomes above $225,000 and single filers with incomes above $125,000. Buyers will have to repay the credit if they sell their homes within three years. You must be under contract to buy by 4/30/2010 and finish your closing transaction by June 30, 2010.
New Tax Credit for Move-up Buyers Added
If you have owned and resided in a home for 5 consecutive out of the last 8 years, you now qualify for a $6500 tax credit should you decide to make a move and buy a new home. The time frame for purchase is identical to the first time buyer tax credit; You must be under contract by April 30, 2010 and finish your transaction by June 30, 2010.
**Get the Tax Credit - Use a Reverse to Buy
Seniors can now use a reverse mortgage to purchase a home. Only use the cash necessary to buy as the difference between the sales price and your maximum allowable reverse mortgage benefit, keeping thousands of dollars working for you instead of stuck in your equity. If this is the first time you have owned a home in the last 3 years, you qualify for up to $8000. If you are moving from your existing home and have lived in it for 5 conscutive out of the last 8 years, you will qualify for the $6500. Using a reverse mortgage, you will have NO monthly payments!
Tax Credit Versus Tax Deduction
It’s important to remember that the tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000! If you are going to amend your 2008 return, you need to close on your transaction before the end of December 2009. The extension of this tax credit will be applied to your 2009 return after January 1, 2010.
Phaseout Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $225,000 and single filers with incomes above $125,000.To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.
Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.
Getting the Money NOW!
If you have already purchased a home since the beginning of the year, you can get the money now by either applying for it on your 2008 return or amending your return if you already filed. I am including the current IRS form for obtaining the credit. Money will be sent by check or deposited directly into your bank account, supposedly between 6-8 weeks of application.
NEED TO AMEND YOUR 2008 RETURN?
