As many know, the deadlines are soon approaching and the Tax Credit that are being offered by the government are soon expiring. Many First Time Home Buyers and Move Up/Repeat Buyers can still take advantage of these incentives but there is not much time left. As always, please use this only as a guide and always consult your CPA to determine if you qualify.
The Credit has been extended until April 30, 2010. This will apply for both First Time Buyers and Existing owners. In order to qualify, a buyer would have a purchase contract dated before April 30, 2010 and the loan would have to fund before June 30th, 2010. There is no exceptions to this rule as of right now and buyers that do not adhere to this guidelines will most likely see their possible credit disappear right in front of them. Buyers, agents and lenders alike need to be aware of these deadlines which might leave some home purchase transaction buyers out in the cold.
In addition to the deadlines, there are other qualifications. These are the following:
Income Qualifications: Single Tax payers can make no more than $125,000 annually while married couples filing jointly cannot make more than $225,000. First Time Home Buyers can receive a tax credit up to $8,000 while existing home owners purchasing can take advantage up to $6,500.
First Time Home Buyer Defined: A first time home buyer is defined as someone who has not owned a property in the last 3 years of the new home purchase. For married couples, this would apply to both people not just one. If one of the couples does not fall into this category, thend NEITHER one of the couples would be considered a First Time Home Buyer. Move Up /Repeat Buyer Defined: A move up buyer is defined as someone who has lived at least 5 years in the same residence out of the last 8 years from the purchase date. Both spouses must qualify under this rule to take advantage of the move up buyer tax credit. The buyer(s) do not have to buy a bigger or more expansive house to qualify.
How is the Tax Credit Determined: For first time home buyers and move up buyers alike, the tax credit is calculated the same way. The only difference is the cap in the tax credit of $8,000 for first time home buyers and $6,500 for move up buyers. The Tax Credit is basically 10% of the purchase price not to exceed the above mentioned figures. Also, the house cannot be more than $800,000 in price on the move up buyer side.
Partial Tax Credits with Higher Income Example: Couples with income exceeding the income limits may still qualify for partial tax credit. For example, a couple making $235,000 annually is $10,000 over the max income. The "phase out range" is 20,000 so you would basically have to divide 10,000 by 20,000 and get a factor of .50. You then take 1.0 - .50 and get .50. At this point you would multiply 8,000 by .50 and get a $4,000 tax credit as a result.
These are the basics of the tax credit. You can always read up more about it on www.fhamadesimple.com/TaxCredit.html
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