The ABCs of the Buyers Tax Credit

Few agents are marketing the 2010 Tax Credit for Homebuyers, perhaps because it is a bit confusing. In order to shed light on the subject, here are some simple steps to learning about the credit. Use them to give your buyers an incentive to move.

A) $8000 is available for first time homebuyers, who have a house under deposit by April 30, 2010. They have until July 1st to close. First time homebuyers are those 18 and over, who have not owned a home in the past three years.  If they are single, they must earn less than $125,000 to qualify for the full tax credit. Couples can earn up to $225,000 for the maximum credit.

B) Current homeowner wishing to purchase another principal residence can claim up to $6500, provided they have lived in their current home for 5 consecutive years within the past 8 years. The current home does not have to be sold, but the new home must be the principal residence for the tax credit to apply. They must remain in the new home for at least 3 years, or risk having to pay back the credit. While the Tax Credit for Current Home Owners is being advertised as a "trade up" credit, the new home does not need to cost more than the current residence. The new  home has to be under deposit by April 30th and close by July 1, 2010.

C) The cost of the home can not exceed $800,000. The maximum tax credit is $8000 for first time homebuyers, or 10% of the sales price of the home, whichever is lower. For current homeowners, the maximum credit is $6500, or 10% of the sale price, whichever is lower.

This information is provided by NAR. It is a good idea to advise your clients to let their accountants know they are looking to purchase a home under this program, and verify their tax credits. There are smaller credits for persons earning slightly higher incomes, but it gets tricky to advise clients on this. Leave it to the tax experts.