Home Buyers Tax Credit Extension has Benefits for First TIme Buyers

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. NAR’s statistics showed pending home sales were, in fact, up.8% for October, 2009, as compared with October, 2008.

Representative Jim McDermott (D) from Washington State 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 benefits of the first time home buyer credit remained capped at $ 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. Qualifying homebuyers that purchase homes during the same period AND have owned the home being sold or left as their primary residence for five years consecutively of the past 8 will qualify for up to $ 6,500 credited off. The qualifying home has to be in the binding contract phase of purchase no later than April 30, 2010 to qualify for the tax credit. The filer must provide a copy of the HUD – 1 Settlement Statement after the sale closes, and the closure must take place before June 30, 2010. No person under the age of 18 can qualify for the tax credit benefit.

Income Qualifications

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 less than $ 225,000 to qualify fully. Single homebuyers that earn between $ 125,000 and $ 145,000, or married (filing jointly) couples earning between $ 225,000 and $ 245,000 also could qualify for part of the tax credit. The amount of the tax credit is on a sliding scale, so the more you earn over the maximum, the less tax credit is available to you.

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 deduction is a reduction of your taxable income 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.

Bookmark It

Hide Sites