Little Known Facts About the Homebuyer Tax Credit

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Services for Real Estate Pros with Scena Home Staging & Decora Photography

Little Known Facts About the Homebuyer Tax Credit

The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extended and expanded the homebuyer tax credit. Under the new law, April 30, 2010, to buy a principal residence 2010. You must close on the new home by June 30, 2010.

While both first-time homebuyers and existing or previous home owners can take advantage of the tax credit, the IRS gets the final say on who and who does not qualify.

Here are some little-known "interpretations" of the homebuyer tax credit that most people are not aware of:

  • Any home that is purchased as your principal residence and is located in the United States qualifies. This means the homebuyer tax credit is not available for homes purchased in the US Territories - it's available only in the 50 states.

  • When you buy a 2-, 3- or 4-unit home and occupy one of the units as your primary home, you can claim up to 10% ($8000 maximum tax credit) of the unit you will occupy - NOT the entire sales price.  Example:  If you bought a duplex for $100,000, your "cost basis" is $50,000 (one-half of $100,000) and the maximum homebuyer tax credit you can claim would be 10% of $50,000, or $5,000.

  • Income limits for the homebuyer tax credit are based on your adjusted gross income. Your income can exceed $125,000 (single) and $225,000 (married) by up to $20,000 and you will still qualify for a partial homebuyer tax credit based upon a modified adjusted gross income (MAGI) formula created by the IRS.

  • For New Construction, the "date of purchase" is considered the date you occupy the property - NOT the closing date or the start-or-construction date.

  • Homes sold on "Land Contract" or "Contract for Deed" can qualify for a homebuyer tax credit. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include:


    • the right of possession;
    • the right to obtain legal title upon full payment of the purchase price;
    • the right to construct improvements;
    • the obligation to pay property taxes;
    • the risk of loss;
    • the responsibility to insure the property; and
    • the duty to maintain the property.
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East Bridgewater, MA 02333
Phone: (508) 443-1332

Lew Corcoran, ASP®, IAHSP, IAHSP-CB
Accredited Home Staging Professional
Professional Real Estate Photographer

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Stanton Homes 12/29/2009 03:00 AM
Topic:
Home Buying
Location:
Massachusetts Barnstable County
Groups:
1st Time Buyers
Consumer Mortgage Tips
MA REALTORS
Realtors®
Tags:
firsttime homebuyer tax credit

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Rainmaker
1,796,164
Jeremy K. Frost
Keller Williams Realty - Dripping Springs, TX
Associate Broker, ABR,CNE,CRS,ePro,PSA,RENE,SRS

Thanks for the post! This is great insight on an important topic right now!

Dec 29, 2009 12:56 AM #1
Rainmaker
139,388
J Perrin Cornell
Coldwell Banker Cascade Real Estate - Wenatchee, WA
Broker, ABR, VAMRES

Pretty much aware of this except for the Territories...but then Im inland so probably not an issue for me but it will be for some...

Thanks!

Dec 29, 2009 01:05 AM #2
Rainmaker
394,953
Lew Corcoran, ASP®
Scena Home Staging & Decora Photography - East Bridgewater, MA
Home Stager & Real Estate Photographer

Jeremy - thanks for your comments. This shows that home buyers should consult with a mortgage professional before making a buying decision.

Perrin - Glad to hear you're up to speed on the homebuyer tax credit. As for buying a home in one of the territories, it's a question we sometimes see and thought it should be addressed.

Dec 29, 2009 01:21 AM #3
Rainer
295,621
Stephen Kappre
KW Hometown - Mantua, NJ
Helping You Home

I didn't know that about the unit %.  Albeit I rarely lend on multi-unit homes.  

Jan 05, 2010 10:27 AM #4
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Rainmaker
394,953

Lew Corcoran, ASP®

Home Stager & Real Estate Photographer
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