The First Time Home Buyer Tax credit was authorized as part of the American Recovery and Reinvestment Act of 2009. The credit is not a deduction, meaning you get the money straight off the your tax bill. If you owe $8,000 and you get an $8,000 tax credit you owe nothing.
The bill authorizes up to an $8,000 tax credit for qualified people who happen to pick up a home between January 1, 2009 and December 1, 2009. If you have been thinking about buying a home you should jump on the bandwagon soon or you could miss out on this credit.
- Anyone who has not owned a primary residence in the last three years.
- Married couples where both spouses have not owned a primary residence in the last three years
- The qualifying individual on a joint purchase when not married. If one of the two of you qualifies you get the credit.
- Someone who owns/has owned a vacation property but not a primary residence in the last three years.
- Someone who owns/has owned a rental property but not a primary residence in the last three years.
Limits on The Credit
- The credit is 10% of the purchase price up to $8,000
- If you are applying individually the income limit is $75,000
- Married applicants must make less than $150,000
- You could still qualify above the income limits for a reduced credit
- Home must close escrow no later than November 30, 2009
- Credit can be claimed against 2008 tax filing
- If you aren’t a U.S. Citizen you may qualify if you are not a nonresident alien.
- If you are building a house the date of first occupancy counts as the close date.
Why you Should Hurry
The tax credit is only good for purchases which close escrow by November 30, 2009. There is a lot that goes into buying a house and it can take a good bit of time, for instance you are going to need to:
- Get approved for a mortgage
- Find house to buy
- Make an offer on the house
- Haggle over the price
- Get a home inspection
- Have the issues corrected
- Work through any additional contingencies
- Get through underwriting
- Hope your broker is ready
- Close on the loan
You need to get the whole set done by the end of next month if you want to capitalize on the $8,000 credit. If you are waffling on your home but want the credit now is the time to pull the trigger. The only reason I could see to wait is the potential for housing demand to fall like a rock after the credit expires. If that happens home prices are going to start to falter again and you may be able to get a better deal. Don’t count on this assumption though, if you want a house go ahead an get it houses are on sale and you get an extra $8,000 to help get it on the straight and narrow.