resident Obama\’s signing of an Extended Tax Credit for First-Time Homebuyers should be a boost to the economy, with extensions and expansions that will give more real estate buyers the impetus to purchase a home sooner in the year rather than later. Here's why it might pay to purchase a home early in 2010.
The Tax Credit is for any home purchases made between November 7, 2009 and April 30, 2010. The maximum amount is still $8,000 for first-time homebuyers, $4,000 for buyers who file separately. However, the expansion now includes a $6,500 credit for married couples who are current homeowners and who choose to sell their home and purchase another home, provided that they have lived in their current homes for five consecutive years within the last eight years (the tax credit is $3,250 for singles or those filing separately). Let\’s say, for example, that you purchased your home in 2003 and lived in it for five years. In 2008, you decided to lease it out. You could still be eligible for the tax credit if you sell that rental and purchase a new home to live in.
Income limits have also been increased from the previous tax credit, although the closer a homebuyer comes to those limits, the less their tax credit amount will be. That income range is $125,000 for a single buyer, $225,000 for a married couple.
If your closing date falls after April 30, 2010, you can still secure the tax credit, provided that you can furnish proof of a written, binding contract to purchase before that date. When filing your tax credit, you must also furnish proof of purchase of the home ( View a Tax Credit Comparison Chart).
Benefits
\“The new $8000 credit can be used towards thedown paymentof a house bought in the credit qualifying period,\” according to an article on SavingstoInvest.com. You’ll need to speak with a professional, such as your lender, in order to understand how this credit works to your advantage. Furthermore, the tax credit does not need to be repaid, provided that you remain in your home for a period of at least three years; otherwise, it is paid back in the sale of the property.
This expanded tax benefit should provide another stabilizing factor to the real estate market, which will in turn helps to boost the economy. According to the National Association of Realtors President Charles MacMillan, this tax credit will give families incentives to purchase and get a great deal on a home and interest rates, while at the same time provide jobs for people in different industries across the country.
Although the previous tax credit only boosted purchases on foreclosures and short sales, NAR chief economist Lawrence Yun believes that this time, the expansion to include current homeowners will increase the amount of buyers who take advantage of the program, making the program even more effective than its previous counterpart by \“producing [those] additional benefits.\”
Limitations
Incomes above $125,000 for those filing singly and incomes for married couples above $225,000 are not eligible for the tax credit. The closer your income comes to this limit, the less you can expect to receive as a credit.
A more expensive home will reduce the tax credit amount. Homes over $800,000 are not eligible for the tax credit.
Even though the tax credit extends for another three months and a half, keep in mind that it takes time to close a purchase. In this particularly competitive real estate market, it’s better to get started as soon as possible if you plan on taking advantage of this credit.Talk with a Reliable Realty Agent or your lender to discuss your options.
