Homebuyer Tax Credit Deadline Looms
March 14, 2010 by Michele Lerner | Category: Investing
Realtors around the USA are anticipating an early spring real estate market this year as homebuyers rush to get a property under contract by April 30, 2010 in order to qualify for the federal homebuyer tax credit. Buyers will need to have done more than just make an offer for a home by the end of April: the sellers will have to have accepted and signed the contract, too.
Buyers feeling pushed by this deadline do have a bit of break after April 30, since the tax credit allow settlements to take place as late as June 30.
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This is the third federal homebuyer tax credit to be offered in the past three years, and this time around it is the more extensive. Not only have the income limits been raised, but the tax credit is not limited just to first-time buyers. Repeat homebuyers who meet certain conditions can also qualify for the credit.
The tax credit is restricted to buyers who will live in the residence, so investors will not be able to take advantage of this particular benefit when buying property.
How to Qualify
To qualify for the first-time homebuyer tax credit, buyers need to meet the following criteria:
- Have not owned a primary residence in the previous three years
- Single tax payers may earn up to $145,000; married tax payers may earn up to $245,000. The credit phases out between $125,000 and $145,000 for singles; and between $225,000 and $245,000 for couples
- Tax credit is equal to 10 percent of the purchase price or up to $8,000
To qualify for the repeat buyer’s tax credit, the income limits are the same, but the buyers need to meet these criteria:
- Have owned and occupied their primary residence for five consecutive years within the past eight years
- Tax credit is equal to 10 percent of the purchase price or up to $6,500
In both cases, the tax credit applies only to homes which will be primary residence of the buyers. The tax credit is available only for purchases of property valued under $800,000. More importantly, the tax credit does not need to be repaid unless the property is sold or ceases to be the primary residence of the owners within three years of the purchase date.
True Credit At Tax Time
A nice feature of this tax credit is that it is a true “credit”, not a deduction. In other words, if you qualify for the full $8,000 tax credit and you also earn a $1,000 refund from your 2010 taxes, you can receive a check for $9,000 from the federal government next spring.
Plenty of homebuyers wish they could have the money upfront to help purchase their home, but they will have to wait until they receive their tax credit to actually have the cash on hand. Many homebuyers are opting to use the cash to repay down payment money borrowed from relatives or from a retirement fund or simply to replenish a depleted savings account. Others plan to use the money to make home improvements which will increase the value of their home.
Act Right Now
While the tax credit is a terrific incentive for buyers, they will need to move fast in order to meet that April 30 deadline.
Get Pre-qualified for a Mortgage
First, start by meeting with a lender to obtain a prequalification for a mortgage, unless you plan to pay cash. No one should shop for a home without knowing first exactly how much they are willing and able to spend on their monthly housing payments.
Meet with a Good Realtor
Next, find a trustworthy Realtor with knowledge about where the values are in your local market. A good agent can help you define exactly what you want in a home and match those needs and wishes with a residence you can afford. Depending on your area, you may need to lower your expectations and downsize your dreams a little so that you can comfortably pay for your home.
Start Looking!
In some areas, competition for affordable homes is already rampant, so be prepared to spend a lot of time searching for the right home and then making a reasonable offer. Again, a Realtor can walk you through that process and give you a better chance at negotiating your way into becoming a homeowner.
Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance and business. Her clients include The Washington Times, Bankrate.com, Urban Land Magazine, NAREIT’s Real Estate Portfolio and numerous Realtor association publications. Michele’s first book, “HOMEBUYING: Tough Times, First Time, Any Time” is available now at Amazon.com or from MicheleLerner.com
