The following information is courtesy of Andrew Little, a favorite lender of mine. His team is super sharp, are excellent communicators, and have their fingers on the pulse of the first time homebuyer market in the Valley.
Contact info: Andrew Little, Sales Manager, Countrywide Bank FSB. 480-384-4012. www.aLittleMortgage.com or Andrew_Little@Countrywide.Com
Part of the Housing Stimulus bill passed in late July is a tax credit to first time homebuyers. Here's the breakdown of the in's and out's of the bill.
Who is Eligible
- The $7,500 tax credit is available for first-time home buyers only
- The law defines a first-time home buyer as a buyer who has not owned a home during the past three years
- All U.S. citizens who file taxes are eligible to participate in the program
- Home buyers who file as single or head-of-household taxpayers can claim the full $7,500 credit if their modified adjusted gross income (MAGI) is less than $75,000
- For married couples filing a joint return, the income limit doubles to $150,000
- Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit
- Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit
- The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples with an MAGI that exceeds $170,000
Effective Dates for the Tax Credit
- First-time home buyers would receive a $7,500 tax credit for the purchase of any home on or after April 9, 2008 and before July 1, 2009
- To qualify, you must actually close on the sale of the home during this period
Tax Credit is Refundable
- A refundable credit means that if you pay less than $7,500 in federal income taxes, then the government will write you a check for the difference
- For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government
- If you are due to receive a $1,000 tax refund from the government, your refund would grow to $8,500 ($1,000 plus $7,500 from the home buyer tax credit)
- Buyers can take the tax credit in their 2008 or 2009 tax return
- If you purchased the home in 2008, the tax credit is taken on your 2008 tax return. If you buy in 2009, you have the option of taking the credit on your 2008 or 2009 tax returns.
Types of Homes that Qualify for the Tax Credit
- All homes, whether single-family, townhomes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a home in the prior three years. This also includes newly-constructed homes.
- The tax credit essentially serves as an interest-free loan to be repaid over 15 years
- For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. However, the buyer doesn’t have to start repaying the credit until two years after the tax year in which the credit is claimed.
- If the home owner sold the home, then the remaining credit would be due from the profit of the home sale.
- If there was insufficient profit, then the remaining credit payback would be forgiven.
For more details on the tax credit, go to www.federalhousingtaxcredit.com