Homebuyers and The New Tax Credit... You Better Hurry

Tax Credit Upto $6,500 to $8,000.

$6,500 Homebuyer Tax Credit at a Glance

• A "Current or Existing Homeowner" for the purposes of this credit must have used the home sold or being sold as a principle residence consecutively for 5 of the previous 8 years.
• The tax credit is equal to 10 percent of the home's purchase price up to $6,500.
• The credit is available for homes place under contract prior to April 30, 2010 which then needs to close prior to July 1, 2010.
• Homebuyers may purchase any new construction or existing single dwelling home including condos and townhomes.
• The tax credit is "refundable" or claimable for the year of purchases regardless of the homebuyer(s) tax liability.

Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

Existing Homeowner Credit example:

A couple with joint income less than $225,000 annually.

The couple has owned a personal residence consecutively for 5 of the last 8 years and sells this home to purchase a new home for $200,000 which takes place prior to April 30, 2010. The couple qualifies for the $6,500 tax credit.

Assume their 2009 federal tax liability is $12,500 without the tax credit, the $6,500 tax credit would lower their federal tax liability to only $6,000.

If the couple's 2009 federal withholdings was exactly $12,500, they would have received no refund without the tax credit because their federal income taxes equal their federal withholdings exactly.

With the Existing Homeowner Tax Credit, the couple will get a tax refund of $6,500.

$8,000 Homebuyer Tax Credit at a Glance

• A "First-Time Homebuyer" is defined as a person who has not owned a home for the past three years.
• The tax credit is equal to 10 percent of the home's purchase price up to $8,000.
• The credit is available for homebuyers who enter into a written binding contract prior to
  April 30, 2010. The buyer will then have until July 1, 2010 to close.
• Homebuyers may purchase any new or existing single dwelling home including condos and townhomes.
• The tax credit does not have to be repaid if the home isn't sold within three years of purchase.
• The tax credit is "refundable" or claimable for the year of purchase regardless of the homebuyer's tax liability.
• Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The homebuyers may participate in a mortgage revenue bond program such as NIFA and still be eligible for the tax credit.

First-Time Homebuyer Tax Credit example:

A couple with joint income less than $225,000 annually.

The couple enters into a binding contract to purchase a home prior to April 30, 2010 and closes on their new home prior to July 1, 2010. The couple qualifies for the full $8,000 tax credit.

Assume their 2009 federal tax liability is $12,000 without the tax credit, the $8,000 tax credit would lower their federal tax liability to only $4,000.

If the couple's 2009 federal withholdings was exactly $12,000, they would have received no refund without the tax credit because their federal income taxes equal their federal withholdings exactly.

With the first-time homebuyer tax credit, the couple will get a tax refund of $8,000.

First-time homebuyers should consult their tax advisor for more information.

Information Believed To Be Reliable But Not Gaurenteed. Please Seek Professional Advice When Making a Purchasing Decision.