President Barack Obama signed into law a $24 billion economic stimulus bill providing tax incentives to prospective home buyers. According to the Associated Press, the bill is expected to contribute $22 billion to the economy, offering qualified home buyers up to $8,000 in tax incentives until April 30, 2010!
The current bill will offer First Time Home Buyer's $8,000 in tax incentives, if they have not owned a home in the last 3 years.
The extended tax credit has also established a new incentive for Move-Up Buyers! Qualified home owners could receive up to $6500 in tax incentives to purchase a new primary residence between November 6, 2009 and April 30, 2010.
Here are some important things you should know...
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First Time Home Owners income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return.
According the the
National Association of Home Buildersthe income is calculated based on this formula...
The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
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Move-up Buyers need to make no more than $125,000 for single buyers and $225,000 for couples
According the the
National Association of Home Buildersthe income is calculated based on this formula...
"The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains."
To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
I recommend you talk to your CPA for a more plain English version!
- You can not purchase a home from your family members or your spouse's family members.
- You can purchase any new primary residence for a purchase price less than or equal to $800,000.
- You must have lived and owned your current home for at least five consecutive years of the eight years prior to the purchase date.
- You can down size your home.
- You can build a home, but the first occupancy must be after November 6, 2009 and on or before April 30, 2010
- Non-resident aliens can qualify for the tax credit if they meet all requirements. Ask your CPA for specifics!
- Newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
- The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $6,500. This tax credit is a dollar-for-dollar reduction in what the taxpayer owes to the IRS. Any leftover tax benefit would be mailed to the home buyer in the form of a check.
This is exciting and I am sure it will stimulate the ccurrently non-exciting Move-up Buyer market! Hopefully the banks will release some more of their inventory! There are hungry bbuyers out there who want to get into a home before Christmas!
Have question about the tax credit? Post a comments and I will try to point you in the right direction!
Happy Hunting!
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Something tells me that March and April will be really busy.... and that there are a lot of buyers in escrow right now that just settled for anything to beat the old deadline.