By now, most of you probably know that if you are a first-time homebuyer and either bought or will buy a home this year, you may qualify for a tax credit of 10% of the purchase price of your new home up to $8000. Here are a few of the finer points as presented to me from my favorite loan originator, my manager, and my accountant. While this information comes from reliable sources, I strongly urge you to confirm the following independently by consulting an accoutant or tax attorney.
- The tax credit is 10% of the purchase price of a qualifying home. The maximum tax credit is $8000.
- According to my sources, mobile homes on rented lots do not qualify. Some manufactured housing on its own land, may.
- You don't necessarily have to be a true first-time home buyer. My sources say that as long as you have not owned property (been the grantee on a deed) in the last three years, you can still qualify for the tax credit.
- This is a fully refundable tax credit. In other words: If, when you file your 2009 tax return, you don't owe the IRS any money, but you're not getting a refund, you will get up to 10% of the purchase price of a qualifying property. Here are a few examples.
Fred is a first-time homebuyer. He purchased a property in June 2009 for $70,000. He files his 2009 income tax return in spring 2010 and discovers he has zero federal tax liability. Fred will receive a check from the government for $7000. Wow.
Mary also bought a home in 2009. She closed in May and bought a house for $100,000. She is also a first time homebuyer. When Mary files her 2009 tax return, her accountant informs her that she owes the IRS $2500. Mary is bummed until her accountant reminds her that she qualifies for the tax credit because she bought a home in 2009. Mary will receive the maximum tax credit of $8000. So, instead of writing the IRS a check, she'll be getting a refund of $5500.
Mork and Mindy sell their existing home in 2009 and buy a new one. They do not qualify for the tax credit.
George and Loretta have been renting for 5 years following the sale of their home. They buy another home for $80,000 in 2009 and close August 31st. When they file their tax return, they find that they withheld too much money this year, and are entitled to a refund of $1500. Their purchase of a qualifying home now means they will get a check for $9500.
Larry thought he had more time, so he waited to look instead of calling Damon Covert to help him buy a house earlier in the year. Larry finds the right home, but he doesn't close until December 1st. Poor Larry, he won't get a tax credit.
That's right, boys and girls. You must CLOSE by November 30, 2009 or you won't qualify for the tax credit. As of this writing, I have not heard of any plans to extend this program. Don't delay - buy today. Common loans like FHA, USDA, and PHFA are taking up to 60 days or more to close. Therefore, you need to have your new home picked out and under contract by the end of September, or you run the risk that you will not receive the tax credit.
This tax credit program is unprecedented and will not likely be repeated. I urge you to take advantage of this opportunity. If you can buy a qualifying home for the first time (or the first time in over three years) and you don't, please allow me to refer you to a mental health professional. You might be crazy. Call me today to get the process started. 724-458-6000 x 22
