Due to Expire After April 30, 2010
The fed giveth, and the fed taketh away. If you are dreaming about your first home–or yearning for a new home after having lived in yours awhile–take action soon. Unless you have a binding contract to buy a home by April 30 of this year, you will miss your opportunity to claim either $8,000 as a first-time buyer or $6,500 as a move-up or repeat home buyer.
First-time home buyers purchasing any kind of home–new or resale–are eligible to take advantage of the $8,000 tax credit. Your purchase must occur after January 1, 2010 and be completed by April 30 (with certain limited exceptions). Home sales that conclude by June 30, 2010 will qualify, provided that they are due to a binding contract in force on or before April 30.
A first-time home buyer is a person who has not owned a principal residence during the three years prior to the purchase. If you are married, both you and your spouse must qualify. If you do, you will receive 10% of your new home’s purchase price, up to $8,000. There are income limits as well: up to $125,000 for single taxpayers and $225,000 for married persons filing a joint return. Ownership of a vacation home or rental property not used as a principal residence does not disqualify you from claiming the tax credit. Any kind of home will qualify, so long as it sold for less than $800,000. This includes condominiums, mobile or manufactured homes, even houseboats, so long as the house is your principal residence.
Claim your credit using IRS Form 5405. You must attach a copy of your HUD-1 settlement sheet to the form.
Move-up or repeat buyers are persons who have owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date; the test is applied to both spouses for married persons. You may claim 10% of your new home’s value, up to $6,500, and you do not have to purchase a more expensive home to qualify. The same income limits apply as for the first-time home buyers’ tax credit.
A tax credit is a direct deduction from the federal taxes you owe, and thus more valuable than a tax deduction–which is a deduction from the amount of income that is taxed. If you owe $8,000 in Federal income tax and correctly claim the first-time buyers’ credit, your tax debt will be zero.
Another important feature is that HUD allows “monetization” of the tax credit, which means that buyers using many different types of mortgages can apply their expected credit toward their home purchase immediately rather than waiting to file their tax return to use the credit. For a complete explanation of this somewhat complicated concept, please look at http://www.federalhousingtaxcredit.com/faq2.php#17.
For a detailed explanation of this valuable tax credit, visit the following site: http://www.federalhousingtaxcredit.com/
Sonsie Conroy is a Realtor with Coldwell Banker Premier, specializing in first-time buyers, serious sellers, and “problem properties” that need extra marketing help. Call her at 235-2351 to discuss your needs.