Homebuyer's Tax Credit

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What is all the information I keep hearing about a Homebuyer Tax Credit? Currently two tax credits exist for home buyers. They are filed through the IRS with your 2009 Taxes, or as an amended return.

The first is a tax credit for First Time Homebuyers. This credit allows you to receive up to 10% of the purchase price (up to $8,000) when you purchase a home. This blog is not designed to qualify you for the credit, but to give you basic information. You must not have owned a home that was your primary residence within the last 3 years. You cannot use the credit to buy a home from a close relative (parent, grandparent, spouse, or child), or when you inherit a home. You cannot use the tax credit if you are married, and your spouse has owned a home in the last three years. Your individual income cannot exceed $125,000 and joint returns cannot exceed $225,000. This really is a great deal for first time buyers.

The second credit is probably less understood and applies to Long Term Homeowners. It is available to homeowner’s who have lived in a house that is their principle residence for at least 5 of the last eight years. You do not have to own a home currently, but you cannot have been in the home for less than 5 years, or vacated the home more than 3 years ago. If it has been more than three years since you owned a home, you should qualify for the First Time Homebuyer’s Tax Credit above, subject to income limitations. The credit is up to $6,500 and like the first time buyers credit is refunded to you through the IRS.

To qualify for either credit, you must go ahead and purchase a home. The deadline to have a contract is April 30th 2010, and you must close within 60 days of the contract. After you have closed, you will use the HUD-1 Settlement Statement from your closing to file for the Tax Credit through the IRS. If you owe money to the IRS, that is going to be paid from any tax credit that is due to you.

Now is a great time to be looking as a buyer. Rates are low and inventory is available. If I can assist you with financing for your new home, don’t hesitate to contact me.

For more information on credit issues go to:

http://www.irs.gov/newsroom/article/0,,id=204671,00.html

This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.