The recession could be a good thing for first time homebuyers and some existing home owners who decide to take advantage of the newly updated Federal Housing Tax Credit that is now being offered. A federal tax credit of up to $8,000 or ten percent of the purchase price is being offered to first time home buyers and a federal tax credit of up to $6,500 is being offered to existing home owners.
Here is a quick overview of the program:
Who Qualifies For These Programs
• First-time home buyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
• Existing home owner's who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence ("repeat buyer"), may be eligible for up to a $6,500 tax credit.
Effective Dates for These Programs
• The eligibility period for the program is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the program provided closing occurs prior to July 1, 2010.
Updated Income Limits
• Home buyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
• For married couples filing a joint return, the combined income limit is $225,000.
• Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
• The program is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
Types of Homes that Qualify
• All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Rental property and vacation home purchases do NOT qualify.
Is the Tax Credit Refundable?
• Yes, refundable means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
• All qualified home buyers can take the program on either their 2009 or 2010 income tax return.
Are There Payback Provisions?
• The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.
These new incentives being offered to spur the economy will be very beneficial for those who are looking to buy or sell a home. The real estate industry went through a similar scenario in the seventies with large inventories of homes and price declines in real estate market. The $2,000 incentive that was offered to home buyers then helped balance the real estate market and helped the United States pull out of a recession in 1975.
Now may be the chance that many people have been waiting for to get into a new home. Home prices and interest rates in most areas are at the lowest they have been in years so now it is possible for many to buy more house with less money. These new programs should help boost the real estate market in areas that have been hit hard by the recession.
Leave a Reply