First Time Buyer Credit
We thought today, ‘Tax Day’, to go over the first time buyer credit.
A tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a primary residence on or after January 1, 2009 and before December 1, 2009. Unlike the first tax credit enacted in 2008, the new credit does not have to be repaid. One thing is for sure, the enhanced tax credit is providing an excellent opportunity for new home buyers. It’s no secret that we are in a struggling economy and the government has been taking steps to try and revive it, especially the housing market which many say is the heart of the problems.
The American Recovery and Reinvestment Act of 2009 (The official name of the tax credit) has a few key components that home buyers should be
aware of. Most importantly … it’s for first time home buyers and the credit does not have to be paid back. The credit is equal to 10% of the homes purchase price or a maximum of $8,000.00, and is available for any home bought on or after January 1, 2009 and before December 1, 2009. Single taxpayers with an annual income up to $75,000 and married couples with an income up to $150,000.00 can receive the tax break.
So with all this talk about first time home buyers lets be sure that you understand exactly what the government defines as a first time home buyer. The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the past three-year period prior to the new home purchase. In addition for married couples, the law looks at both parties individually but it affects the couple as one. In other words, if you have not owned a property in the past three years but your spouse has owned a principal residence, neither you or your spouse qualify for the tax credit.
However, the tax credit can work for unmarried joint purchases where one party can allocate the credit amount to any buyer who qualifies as a first
time buyer. So a parent may jointly purchase a home with a son or daughter allowing the child to get the tax credit. In addition, ownership of vacation or rental properties that are not used as primary residence do still qualify as first time home buyers for the tax credit.
Now let’s take a closer look at the income limits and what all the small legal print exactly means. Now what the income limits state specifically is that the tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) more than $75,000 for single buyers and $150,000 for married couples who file joint tax returns. If an individual makes greater than $95,000 or a couple makes greater than $170,000.00 then the tax credit is reduced to zero. For individuals and couples who’s MAGI falls in between these ranges the tax credit is reduced proportionally.
See our next blog for more property management and real estate sales information.