April 11th, 2010
Homebuying Tax Credits Ending Soon!
Late last year Congress modified the $8,000 First-Time Home Buyer Tax Credit program, turning it from a “first-time” buyer program into an “Everybody” Home Buyer Tax Credit program.
Under the program’s new terms, first-time buyers are eligible for up to $8,000 in federal tax credits and long-time homeowners get up to $6,500. A “long-time” homeowner, according to the IRS, is someone who has used a home as a primary residence for at least 5 consecutive years dating back to 2002.
This is an important qualifier for existing homeowners.
If you plan to claim the Home Buyer Tax Credit in 2010, here’s what you need to know.
Time is running out!
In order to claim the Home Buyer Tax Credit, you must be under contract for your new home no later than April 30, 2010 and you must be closed on your new home between the dates of November 7, 2009 and June 30, 2010.
More details…
The home may not be acquired from a mother, father, spouse, or child
The home may not be acquired from an entity in which you’re a majority owner
The home may not be acquired by gift or inheritance
The home’s primary buyer must be at least 18 years of age
The home’s purchase price may not exceed $800,000
The home must be meant for use as a primary residence
The maximum tax credit as authorized by Congress is for up to $8,000 for first-time home buyers and for up to $6,500 for long-time homeowners. Not everyone will get access to the full amount.
For one, the tax credit is limited to 10% of the home’s purchase price.
A $300,000 home is eligible for up to $8,000 in credits to first-timer home buyers and up to $6,500 to long-time homeowners
A $50,000 home is eligible for up to $5,000 in credits to first-time home buyers and up to $5,000 for long-time homeowners
And secondly, the tax credit is tied to the home buyer’s income levels.
If you are a single-filer with the IRS and your income is less than $125,000, you will receive the maximum credit. Same for joint-filers with income below $225,500. In households where income exceeds those limits, however, the home buyer(s) is subject to a tax credit haircut.
The credit reduction is 5% for each additional $1,000 in claimed income.
Single-filer earning $125,000 : 100% of the tax credit
Single-filer earning $126,000 : 95% of the tax credit
Single-filer earning $127,000 : 90% of the tax credit
Single-filer earning $145,000 : 0% of the tax credit (i.e. no credit)
The math is the same for joint-filers:
Joint-filers earning $225,500 : 100% of the tax credit
Joint-filers earning $226,500 : 95% of the tax credit
Joint-filers earning $227,500 : 90% of the tax credit
Joint-filers earning $245,500 : 0% of the tax credit (i.e. no credit)
At this point, you know your own eligibility, and the size of your credit. However, you may still have questions. Thankfully, the IRS thought of that with their Bizarre Scenario FAQ. It’s worth a look. The FAQ includes scenarios for couples getting married, divorced and separated, plus “flipping” and various “renting homeowner” scenarios.
Here’s how to claim the your Home Buyer Tax Credit. There’s just 2 very basic steps:
Review the eligibility requirements above — just in case!
File your 2010 taxes online
Or, if you want to receive your tax credit faster, consider filing an amended 2009 return. This is especially helpful for self-employed home buyers and other folks that typically file between April 15 and the October 15 deadline.
That’s it! Just be sure that you’ll use your new home as your “main home” for at least 3 years. Otherwise, the IRS will reclaim your refund.
Lastly, this article gives you a good overview, but please consult a tax professional for your specific situation! Want to talk with a home buying expert or a mortgage expert? Skye Bruce Properties has a team of real estate experts to help you though the home buying process. Contact us today!
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