As was hoped by many, Congress passed an extension of the First Time Homebuyer credit and expanded the program to include qualified current homeowners. New deadline isn't until June 30, 2010 for settlement, with contracts executed no later than April 30th. We saw many First Timers wait until the last minute and some executed contracts with insufficient time to close before the previous deadline of November 30, 2009. This will help them and hopefully bring many other buyers into the marketplace. Below are some details.
Tax Credit for Homebuyers
First-Time Homebuyers: First-time homebuyers (i.e. people who have not owned a home within the last three years) may be eligible for the tax credit. The credit is valued at 10% of the purchase price of the home, with a maximum credit of $8,000.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: This is new: the tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
New Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
Tax Credit Vs. Tax Deduction
It's important to remember that the tax credit is just that... a tax credit. The benefit of a tax credit is that it's a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.
Best of all, the tax credit is refundable, meaning the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $5,000 in income tax, she can still receive a check for the remaining $3,000!
Higher Income Limits
The amount of income someone can earn and qualify for the full amount of the credit has been increased. This will be welcome news to Monmouth County homebuyers where the median income tends to be higher than most other parts of the country.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
