First time home buyers muct act by Nov 30 to qualify for $8000

One of the most exciting provisions of the Housing and Economic Recovery Act of 2008 was the First-Time Homebuyer Tax Credit. The credit was expanded as part of the most recent economic stimulus bill (The American Recovery and Reinvestment Act of 2009). The credit is designed to encourage first time home buyers to go ahead and make the leap to purchase their first homes. Combine this tax credit with the fact that home prices and interest rates are at historical lows, and it is indeed an ideal time for many first-time homebuyers to purchase a home!

Here are some things to keep in mind:

• A first time home buyer is defined as someone who has not owned a home in the last three years.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• You cannot purchase the home from a related party like a spouse, direct ancestor, or direct lineal descendent (child or grandchild); however, you can still qualify for the credit if you purchase a property siblings, nephews, nieces, and others.
• If you are married, both spouses must be first-time home buyers. If more than one unmarried individual is buying the property, the credit can be split up among all the individuals that qualify. However, the total credit taken cannot exceed $7,500 for homes purchased in 2008 and $8,000 for homes purchased in 2009.

For Homes Purchased Between April 9, 2008 and December 31,2008:

• The credit amounts to 10% of the purchase price of the home not to exceed $7,500.
• The tax credit works like an interest free loan and must be repaid over a 15 year period.

For Homes Purchased Between January 1, 2009 and December 1, 2009:

• The tax credit amounts to 10% of the purchase price of the home not to exceed $8,000.
• The tax credit does not need to be paid back if you continue living in the home as your primary residence for 3 years without selling it.

How does a tax credit work?

A tax credit is a special provision that reduces income tax liability on a dollar for dollar basis. When filing a tax return, you must include income items, deduction items and the number of exemptions, among other things, to figure your total tax liability. For example, if your total tax liability for the year is $8,000 and you qualify for the full $8,000 tax credit, this credit would wipe out all of the tax due. If your employer already deducted the $8,000 from your pay checks throughout the year, you would receive a tax refund of $8,000. If you owe less than $8,000 in taxes for the year, you are still eligible for the full $8,000 credit when you file your tax returns. In that case, the IRS will write you a check for the difference between $8,000 and your actual tax bill.

If you or someone you know may know qualifies for the first-time homebuyer tax credits or interested in finding out about other recent updates in the mortgage and real estate markets, please give me a call (972) 824-2088 or email leigh@leighbates.com.

To ensure compliance with requirements imposed by the Internal Revenue Service, we recommend that you consult with a properly licensed legal, tax and investment advisors for specific advice pertaining to your individual situation.