<a href=”//GulfPointeProperties.com/wp-content/uploads/2011/04/3.26.10-April-30th-is-Coming-Soon.-Why-Does-it-Matter.pdf”>As Seen in the Naples Daily News and Bonita Daily News</a>
If you’ve been looking for that dream home, this date is crucial. It marks your last chance for the free $8,000 handout by the government. More specifically, this temporary credit is equal to 10% of the cost of the home, up to a maximum of $8,000. It is only available for home purchases that go to contract by April 30, 2010, and that close no later than June 30, 2010. The credit limits a purchased home’s cost to $800,000 to qualify. Here are some answers to some other questions I frequently get as a Realtor:
Do you have to repay the credit?
<em>Nope</em>! The tax credit does not have to be repaid if the buyer stays in the home at least three years. If the home is sold before that, the entire amount of the credit is recaptured on the sale. So, flippers beware!
How does a tax credit work?
Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. A qualified purchaser figures out the total tax owed and then the tax credits are applied to reduce the total tax bill; i.e. if a person has a total tax liability of $9,500, an $8,000 credit would wipe out all but $1,500 of the tax due. If your tax liability is less than the amount of the credit then the IRS will mail you a check for the difference!
If you buy a home in 2009 or 2010, can you apply the credit against your ’08 or ’09 return?
Yes. The law allows taxpayers to “elect” to treat qualified home purchases in 2009 or 2010 as if the purchase happened on Dec. 31, 2008 (or if in 2010, on Dec. 31, 2009.) This means that the previous year’s income limit applies and the election accelerates when the credit can be claimed. A benefit of this is that a homebuyer in 2009 or 2010 will know their prior year income limit, which helps the buyer know whether the income limit will reduce their credit amount. A taxpayer buying a home who wants to claim it on his previous year tax return, but who has already submitted the return to the IRS, may file an amended return, claiming the tax credit using Form 1040X. Consult a tax professional to find out the appropriate steps.
Are there income restrictions to this credit?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing as Single (or Head of Household) are eligible for the credit if their income is no more than $125,000. Married couples who file a joint return may have income of no more than $225,000.
But you already own a home; can you get a handout too?
Yes. Existing homeowners who have lived in their current homes for five consecutive years out of the past eight are eligible for up to a $6,500 tax credit when they buy another home within the qualifying period. The qualified buyer may be a move-up buyer, downsizing and/or a repeat buyer. And for those looking at a retirement home, note that the new property does not have to be more expensive than a previous or current home to qualify for the tax credit. Personal income limits, maximum home value, and contract/closing deadlines are the same as those for first-time homebuyers.
Source of information for this article and full details can be found here: <a href=”//www.floridarealtors.org/AboutFar/homebuyercenter/upload/firsttimehomebuyer_updated.pdf”>//www.floridarealtors.org/AboutFar/homebuyercenter/upload/firsttimehomebuyer_updated.pdf</a>