The deadline is fast approaching to take advantage of the valuable federal tax
credit for first-time homebuyers--worth up to $8,000 for 2009
purchases.
The "American Recovery and Reinvestment Act of 2009" made the
first-time homebuyer credit more generous than a previous credit available for
purchases made last year. For a qualified home purchase between January 1 and
November 30, 2009, the maximum credit equals the lesser of:
* 10
percent of the purchase price of a principal residence or
* $8,000 (or
$4,000 for those who are married but file separately).
To qualify for the
credit, the home sale must close by Monday, November 30.
Merely having a contract by that date is not enough.
To make matters
worse, Thanksgiving falls on November 26 this year, which means a day off for
most people involved in the home buying process (banks, title companies, home
inspectors, attorneys and real estate agents). So there will likely be large
numbers of homebuyers trying to find a property, secure a mortgage, and fit the
closing in by November 30.
The National Association of Realtors estimates
that the entire process can take up to two months. So...now could be the time to
act.
"Am I Eligible?"
Eligibility for the credit
is limited to those who haven't owned a principal residence in the U.S. during
the three-year period that ends on the purchase date. In the case of a married
couple, both spouses must pass this test (even if they don't file jointly). So
you don't really have to be a first-time homebuyer.
For a newly
constructed home, the purchase date is considered the move-in date. To qualify,
the residence cannot be bought from a spouse, parent, grandparent, child, or
certain other related parties.
The credit is reduced or eliminated if
"Modified Adjusted Gross Income" (MAGI) is too high. The phase-out range for
single filers and married individuals who file separately is between MAGI of
$75,000 and $95,000. For joint filers, it is between MAGI of $150,000 and
$170,000.
Under the old rules, which expired on December 31, 2008, the
credit was worth up to $7,500 and all homebuyers were generally required to
repay it over 15 years. The Recovery Act eliminates the 15-year repayment rule
for purchases between January 1 and November 30, 2009.
However,
even under the new liberalized rules that apply for 2009, buyers may
have to repay the credit if they sell or stop using the home as their principal
residence within three years of the purchase date. In such cases, the
credit must generally be repaid by remitting it with the tax return for the year
the triggering event occurs. However, the amount due cannot exceed the gain from
selling the home.
"Come on--this is the kind of thing that will
get extended...right?"
Well, realtors and other organizations
are lobbying Congress to extend the first-time homebuyer credit and even make it
larger in order to continue the real estate market recovery. But with the
government short of cash right now, I wouldn't count on it. We'll keep you
posted of any developments.
And, of course--if you go for it, give us a
call to make sure it's done right!
I hope this helps!
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