The big news in the real estate market today is the $8000 tax credit. This has been key to spurring interest with a lot of my clients. Most of them say this is one of the top three reasons they are interested in buying right now.
If you are like a lot of my clients, you have many questions about the first time home buyers tax credit that everyone is talking about. With house prices so low and interest rates to match, the tax credit only adds to the urgency home buyers feel when they are contemplating a home purchase.
This article is certainly not intended to be an exhaustive explanation or a substitution for advice from a legitimate tax advisor. It is intended to answer some basic questions and clear up any confusion surrounding the tax credit. So please, read on and contact me with questions you may have!
The first question I hear is “How do I know if I am eligible for the first time home buyer tax credit”? Here are a few points to consider:
New Home or Resale
It doesn’t matter if your dream home is a new home or a resale, they both qualify.
The Time Factor
The next question to ask is how long has it been since you have owned a home? If it has been more than three years, pass go and collect up to $8000, you qualify!
There is one caveat. If you are married, then both you and your spouse cannot have owned a home in the last three years. Let me explain a bit further. If you have not owned a house but your spouse owned a house 2 years ago, your purchase will not qualify for the tax credit. It acts as if the marriage is the purchaser, not the individual. You know, the whole two become one thing!
Purpose
What is the main purpose of this home? The purpose of the tax credit is to help entice those who don’t already live in a home they own to purchase one. If you are to qualify for the credit, the home must be your primary residence. The credit won’t help investors or landlords who already own a primary residence, sorry!
The next set of questions I am asked relate to the details about the terms of $8000 tax credit.
How Long Will The $8000 Tax Credit Be Offered?
You only have until November 30th, 2009 to close on your house. This means that you have already found a house and have purchased it before this date. i.e. you have received the keys to move in to your new home. The term for this is the Close of Escrow or COE.
How Do I Calculate How Much of the $8000 Tax Credit I Qualify For?
You will receive 10% of the purchase price of the home back in the way of a tax credit. The maximum amount you can receive is $8000. Please consult with your tax professional to understand the procedure for claiming this credit.
How Much Can I Make and Still Qualify
If you are a Single taxpayer, your limit is $75,000 and if you are married filing a joint return, the limit is $150,000. This can change with your modified adjust gross income.
Do I Have To Repay the Money I Receive From the Tax Credit?
No you do not. That is what is so great about this credit versus the tax credit from 2008. You must make sure you know all the details and understand that this must be your primary residence for three years or they could potentially recapture the credit you received. There are some exceptions so please ask your tax professional about this.
These are just some of the basics that should get you up to speed with the $8000 first time home buyers tax credit. As I mentioned before, please talk to your tax advisor to understand how this will affect your situation.
