The Extended Home Buyers Tax Credit Can Benefit You
2009 First Time Home Buyers Tax Credit
Most people are now well aware of the First Time Home Buyer Tax Credit issued in 2009. The National Association of Realtors (NAR) statistics indicated a consistent rise in pending home sales during the period in which first time home buyers could reap tax credits. In fact, NAR’s statistics showed pending home sales were up 31.8% during October, 2009 when compared with October, 2008.
Washington State Representative (D), Jim McDermott said, “The homebuyer’s credit has helped pave the way for stabilization in the housing market…. Its extension will continue to make homeownership more affordable and bring confidence to a housing market and economy that remain fragile.” There were, however, no tax credits included in this legislation to help those millions of people who currently owned a home or had owned a home within the past five years. There was much grumbling on the part of homeowners who failed to qualify for tax credits under this program.
2010 Extended Home Buyers Tax Credit
On November 8, 2009, President Obama signed into law an extended version of the tax credit legislation as part of a larger economic stimulus package. The tax credit for qualifying home owners who chose to upgrade to a new or more expensive existing residence between November 7, 2009 and April 30, 2010 would enjoy up to $6,500 in tax credit. The first time home buyer benefits remained with a cap of $8,000.
Charles McMillan, President of the National Association of Realtors, states, “The substantial rise in home sales we’ve seen over the past few months proves that the tax credit is working and is being used by buyers who were waiting for the right opportunity to get into the market. This important incentive is helping to stabilize the housing market, stimulate the economy and create new jobs in communities all across our great nation. Extending and expanding the home buyer tax credit will enable even more families to take advantage of current low interest rates and affordable prices to invest in their future through homeownership.”
Buyer Qualification for the Tax Credit Extension
Each qualifying home buyer who has not owned their own residence, nor has their spouse owned a residence, during the three years prior to buying a qualifying home during the period beginning November 7, 2009 and ending April 30, 2010 will receive a tax credit of $8,000. Any qualifying homeowner who buys a home during the same tax credit period AND who has owned the home being sold or vacated as their primary residence for five consecutive years of the past eight years will qualify for up to $6,500 tax credit. The qualifying home must be in the binding contract phase of purchase no later than April 30, 2010 in order to qualify for the tax benefit. A copy of the HUD-1 Settlement Statement must be provided after closure of the sale; closing must occur no later than June 30, 2010. No person under the age of 18 can qualify for the tax credit benefit.
Homebuyers who are not married must have income of less than $125,000 to qualify for the full tax credit. Married homebuyers must have combined incomes not exceeding $225,000 to fully qualify. Single homebuyers earning between $125,000 and $145,000, or married couples filing joint income tax returns indicating income of between $225,000 and $245,000, will qualify for a portion of the tax credit. The tax credit amount is calculated on a sliding scale so that the more money is earned over the maximum, the less tax credit is available.
Tax Credits Versus Tax Deductions
The greatest part of this tax credit program is that it offers a CREDIT as opposed to a DEDUCTION. A tax deduction means that your taxable income is reduced by a specific amount. However, a tax credit means that after your taxes owed or refund due are calculated, the tax credit is subtracted from income tax owed or added to tax refund amount due. This maximizes the benefits to those who take advantage of the 2010 Extended Home Buyers Tax Credit Program.