$8,000 First Time Buyer Tax Credit ExtendedThe First Time Buyer Tax Credit has been extented to April 30, 2010. Also a credit for up to $6,500 for buying another home has been added for persons who have owned a home for at least 5 years. As you can imagine, there are several conditions attached to receiving the credit. Also, it may be possible to receive your tax credit money in advance. Basics of the Program The American Recovery and Reinvestment Act of 2009 includes a provision for qualified first-time U.S. homebuyers to receive a tax credit of up to $8,000. In November 2009, the provision’s deadline was extended and the credit was expanded to give most other homebuyers a tax credit of up to $6,500. The credit amounts to 10 percent of the purchase price up to the credit limit. So a home purchase of $80,000 or more would be good for the full $8,000 credit for "first-time" buyers; and a home purchase of $65,000 or more would be good for the full $6,500 credit for qualifying "repeat" buyers. No credit is available for home purchases that exceed $800,000. The credit never has to be repaid, provided that the buyer continues to own and live in the home as a principal residence for a minimum of three years straight. Under the deadlines revised in November, buyers must have a written, binding contract in place before May 1, 2010 and close before July 1, 2010. Note: As with any tax legislation, the details can quickly become complex with individual filers’ unique situations. Buyers are encouraged to confirm their eligibility and pursue theirr filing questions directly with the IRS or your own tax professional. Program Details • An individual qualifies as a first-time buyer if neither he nor she, nor their spouse, owned a principal residence in the United States in the three years prior to closing. • An individual qualifies as a repeat buyer if he or she, or their spouse, owned and lived in a principal residence in the United States for five consecutive years within the eight years prior to the closing date. • Even if a co-borrower (or someone providing help with the down payment) is ineligible for the credit, the otherwise qualified buyer remains eligible – meaning a parent can help a child (nondependent and at least age 18) buy a home – and the child can receive the credit. • Buyers can receive the full credit even if they don’t owe any taxes for the year in which they file for the credit. • There are income restrictions, which were revised upward with the November modification. The full credit can be taken by individual filers with Modified Adjusted Gross Incomes up to $125,000 and joint filers up to $225,000. The credit phases out after that and is eliminat-ed at $145,000 for individuals ($245,000 for joint filing). Be aware of the distinctions between Adjusted Gross Income, Modified Adjusted Gross Income and Taxable Income. This IRS Web page has details on calculating Modified Adjusted Gross Income. Buyers are encouraged consult the IRS, IRS Web site or a tax professional. How Buyers Can Use the Credit • They can claim the credit only after closing on their home purchase. • For purchases closed in 2009, they can claim it on their 2009 federal tax return or they can file an amended 2008 return to receive the money sooner. • For qualifying purchases closed after Dec. 31, 2009, taxpayers can treat the purchase as if it were made on Dec. 31, 2009 for tax filing purposes to receive the credit earlier than via their 2010 return. Exceptions for Members of the Military, Others Otherwise qualifying military personnel and certain other federal workers on extended duty outside the United States have an extra year to buy a principal residence. There also are repayment exemptions if the requirement to own and live in the purchased property for three years is not met because of extended-duty orders. Here are more details from NAR. Using the Credit to Help with a Down Payment or Closing Costs Some lenders, non-profits and state housing agencies offer bridge loans that enable buyers to borrow against the tax credit to help with a down payment or closing costs. Even FHA-insured mortgages can be linked to such programs. Options for turning the credit into cash vary widely. Costs vary, too. Here’s basic information about the FHA program. And here’s a site that links to details on state programs, some of which include specific FHA options. You can find all the details directly from the IRS by following this link:
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