The First Time Homebuyer Tax Credit is a great incentive for Dallas / Fort Worth area first time homebuyers.  But to take advantage of it, you need to get your plan in motion and start looking for a home rather quickly.  You must close and fund on the purchase of a home by no later than November 30, 2009.  Many changes in the mortgage industry have resulted in much longer closing times. Time will be running out to take advantage of this very quickly.  

The $8,000 tax credit is a true tax credit, not just a deduction from gross income.  Essentially it's $8,000 of free money the government will give you for buying a home as long as you meet certain requirements.   The money can be taken as a direct tax refund or can be used to lower the amount of your taxes due (or a combination of both).  

WHAT ARE THE MAIN REQUIREMENTS TO RECEIVE THE $8,000 TAX CREDIT?

• FIRST TIME HOMEBUYERS are only allowed to receive the tax credit - A first time homebuyer is defined as a person that has NOT OWNED A PRIMARY RESIDENCE IN THE LAST THREE YEARS. 
• PRIMARY RESIDENCE - Individuals must purchase a single family primary residence in order to qualify.  This includes townhomes and condos.  Any type of home purchased as an investment property that you WILL NOT OCCUPY (rental properties, flips) is not allowed.
• INCOME LIMITS -  Maximum Modified Adjusted Gross Income - $75,000 for single buyers / $150,000 for married buyers to receive the full credit.  The tax credit phases gradually phases out and is eliminated up to $95,000 for single buyers and $170,000 for married buyers. 
• TAX CREDIT IS EQUAL TO 10% OF THE PURCHASE PRICE UP TO A MAXIMUM OF $8,000.  So to qualify for the maximum $8,000, you must purchase a home for at least $80,000.  Buyers who purchase a lower priced home will still receive a tax credit, but only up to 10% of the purchase price.
• HOME MUST BE PURCHASED BETWEEN JANUARY 1, 2009 AND NOVEMBER 30, 2009 - For homes purchased between April 8, 2008 and January 1, 2009, you may qualify for a different tax credit. 

DOES THE $8,000 HAVE TO BE PAID BACK?

ONLY IF you do not keep the home as your primary residence for three years.  In that case, the entire $8,000 must be repaid to the IRS in the same year the home is sold or that you move to another primary residence. But as long as you maintain the home as your primary residence for at least three years, YOU WILL NOT EVER HAVE TO REPAY THE $8,000. 

The previous tax credit program for homebuyers who closed between April 8, 2008 and January 1, 2009 did require repayment of the tax credit regardless of how long it was kept as a primary residence. 

CAN I USE THIS $8,000 TOWARDS MY CLOSING COSTS AND/OR DOWN PAYMENT?

There is no way to receive your $8,000 tax credit from the IRS prior to closing.  HOWEVER, HUD is allowing buyers to "monetize" their refund by receiving a loan from a non-profit organization and using that money for closing costs and down payment.  This is ONLY for buyers that use FHA financing for their mortgage. 

There are two state-sponsored programs available to qualified Texas buyers that allow them to secure a loan against their tax credit and repay the loan over a set term.  Terms and conditions apply to both of these, so please call or email me for details.  These programs have specific requirements that must be met in order to obtain the loan and there is an application process that's involved.  Therefore, buyers who have enough money to pay their closing costs and down payment should consider paying those upfront and then consulting with their tax advisor about filing an amended tax return to receive the $8000 after closing.  That process may allow for a quicker closing instead of having to go through this additional process which could potentially delay the closing.

WHAT IF I WANT TO BUY A HOME FROM SOMEONE IN MY FAMILY?

The home cannot be purchased from your parents or grandparents, nor can it be purchased from your children or grandchildren.  It also cannot be purchased from your spouse.  Consult a tax advisor for more information.  

CAN I AMEND MY 2008 TAX RETURN AND RECEIVE THE TAX CREDIT EARLY?

The IRS does allow people to do this, but you will need to consult with your tax advisor regarding the procedure and paperwork involved as I am not licensed to give tax advice. 

Remember, the DEADLINE to CLOSE AND FUND on a home in order to qualify for this program is on or before NOVEMBER 30, 2009.  That happens to be the MONDAY AFTER THANKSGIVING and it will more than likely be one of the busiest closing dates in history.  With the new Federally mandated waiting periods for closing dates, as well as the significantly longer closing times associated with many short sales and foreclosures, there is not much time left to start looking for a home if you plan to meet this deadline and take advantage of the $8,000 tax credit.   Legislation to extend and expand an additional tax credit for homebuyers was rejected by the Senate last week, so many feel that November 30, 2009 will be the final curtain call for homebuyer tax credit benefits from Uncle Sam.