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VIDEO
First-Time Homebuyer
"CREDIT" Q&A
We provide real estate services to buyers
and sellers in Pennsylvania (Berks County, Chester County, Delaware County,
Montgomery County, Philadelphia, Drexel Hill, Haverford Township, Havertown and Upper Darby) as well as in
New Jersey (Brigantine, Atlantic City, Ocean City, Camden County and Gloucester
County).
Yes, the federal government is offering an $8,000
credit against your taxes and it is refundable. This means that if you
don't owe any taxes, you will still get your $8,000. This tax credit is
unprecedented, and you should not miss the opportunity. However,
there are a lot of questions being asked, such as the following:
How is
the credit computed?
The credit is 10% of purchase price up to $8,000. Thus, you only have to
buy a minimum of $80,000 home to get the full $8,000 credit.
Do I
have to pay back this credit?
No. Unlike the prior $7,500 credit in 2008, which will need to be paid
back over 15 years, the $8,000 credit does not have to be paid back.
When
should purchase be made?
It has to be made after January 1, 2009. It also has to be under contract
on or before April 30, 2010, and settled before June 30, 2010.
Does
credit apply to vacation homes?
No. It only applies to principal residence.
How is
"principal residence" defined?
It has to be owner occupied and has to be occupied 50% of the time.
Does
it include condos?
Yes. It includes single homes, condominiums and townhouses.
Who is
a first-time homebuyer?
That's an excellent question. First-time does not really mean "first-time."
You should simply be without ownership interest in your home in the past three
years. Ownership of a vacation home or rental property not used as
"principal residence" does not disqualify a buyer as first-time home buyer.
For married taxpayers, the law tests the homeownership history of both the
homebuyer and his/her spouse.
What
does "refundable" credit mean?
It means that even if your tax liability is less than $8,000, the difference
will be refunded to you. For example, say your liability without the
credit is only $3,000. The $5,000 excess credit will be refunded to you.
Is
there any income limitation, or is anyone qualified?
The income limit is $75,000 for single filer, and $150,000 for married filing
jointly. It is based on Adjusted Gross Income, which includes interests
and dividends.
What
happens if income is in excess of $75,000/$150,000?
Credit phases out up to $95,000 for single, and up to $170,000 for married
filing jointly. That means after $95,000 for single ($170,000 for married
filing jointly), you will not receive anything.
Can
tax credit be used as part of down payment or closing cost?
Originally, this was not allowed. Today, it is
allowed. Under the guideline, FHA-approved
lenders can develop bridge loans that home buyers can use to help cover their
closing costs, buy down their interest rate or put down more than the
minimum 3.5 percent. However, the loan can't be used to cover the minimum
3.5 percent cash or investment required from buyer.
When
can I take the credit?
You can take the credit in 2009 return that you file in 2010. However, you
may elect to take the credit in 2008. If your 2008 return has been filed,
you can simply file an amended return.
Take advantage of this. Don't
miss out.
Remember, deadline is April 30, 2010.
And you have to be settled by June 30, 2010.
What are you waiting for?
To receive
your FREE copy of Homebuyer's Handbook or Homeseller's Handbook, click here.
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