The below information is from the National Association of Home Builders web site. Thanks to Drew Remson, of America’s Mortgage Resource of Metairie, and Jim Smith, of Stewart Title in New Orleans, for kindly forwarding this information.
According to an informed source in my agency, over 40% of home sales in New Orleans for 2009 have involved first time home buyers! Since it is mid-year and this tax credit availability is half over, I thought it a good time to send out this reminder and some basics about the program. Time is running out for first-time home buyers to take advantage of a provision of the American Recovery and Reinvestment Act of 2009 that provides them with a tax credit of up to $8000.00.
Who is eligible? First-time home buyers purchasing any kind of home-new or resale-are eligible for the tax credit. To qualify for the tax credit, a home purchase must close on or after January 1, 2009 and before December 1, 2009.
Who is a first-time home buyer? The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. How is the amount of the tax credit determined? The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000. What are the income limits for claiming the tax credit? The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return.
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount.
How does a home buyer claim the tax credit? The tax credit is claimed on a buyer’s federal income tax return. No other applications or forms are required, and no pre-approval is necessary.
The tax credit is "refundable." What does that mean? The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
Is a tax credit the same as a tax deduction? No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
Can a home buyer access the money allocable to the credit before filing their 2009 tax return? Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment.
The tax credit can be "monetized." What does this mean? It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain down payment and closing cost expenses. Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.
... written by Megan Donaldson Houston Realtor! $7K Free Funds,
September 08, 2009
The tax credit is so much benefit to Home buyers or those who have not purchase in the past 3 years. Currently now, buyers can borrow up to $7,000 from the tax credit prior to the closing, I do not know why Home buyers would not want to use it. I can be reach at 713-385-5231 to help Homebuyer. First time Home buyer seminar Instructor - Megan Donaldson MBA- CBR CRS GRI IRES Realtor
