Tips for The Home Buyer Tax Credit
The federal homebuyer tax credit is available and will benefit first-time homebuyers and homeowners who want to sell their current home and buy a new one. The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it. Here's what you should know:
1. Deadline: April 30, 2010
The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.
2. Credit up to $8,000 or $6,500
Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.
For example, if a first-time buyer purchased a small condominium that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.
3. Get good advice
Homebuyers who want to take advantage of the tax credit should consult the right people for help, including:
- A tax preparer, who can help them ensure they meet all the requirements to use the credit.
- A mortgage lender, who can help them choose a loan program that will fit their needs.
- A Realtor, who can help them locate a home they can afford and want to purchase.
4. Beware of tax fraud
Homebuyers should educate themselves about the tax credit and learn the lingo.
Three Web sites that may be helpful are:
Buyers and sellers should be wary of any advice that sounds suspicious or overly complicated. For instance, buyers who are told to conceal any information from their lender should "get away" from whoever offered that advice.
One final tip: Taxpayers who take the credit will be required to attach a copy of the settlement statement to their federal tax return as proof of purchase. Buyers should keep their paperwork handy.