In November the U.S. Congress overwhelmingly passed and the President signed into law measures to maintain the momentum for a housing market recovery.
The first time home buyer tax credit, originally scheduled to expire at the end of November has been extended to June 2010. The law has also been expanded to include current homeowners who purchase a new primary residence.
This is likely to be their best and final opportunity to receive substantial assistance with the purchase of a home.
The tax credit will be available for homebuyers who sign a binding contract by April 30, 2010 and close on the purchase by June 30, 2010.
The extended legislation offers a tax credit for qualified first-time homebuyers (defined as a home buyer who has not owned a home in the past three years). The amount of tax credit for first-time homebuyers has been set at 10% of the purchase price, capped at $8,000.
In addition, the scope of act has been expanded to include current homeowners who purchase a new primary residence (credit amount for current homeowners has also been set at 10% of the purchase price, capped at $6,500).
Under the legislation, "current" homeowners must have occupied their original/existing home as primary residence consecutively for five of the past eight years. Current homeowners do not need to sell their existing primary residence.
The tax credit is a dollar for dollar benefit that the buyer does not have to pay back as long as they keep the home for 36 months after the purchase. It’s important to emphasize that it’s not a loan or a deduction; it literally is a dollar for dollar reduction in taxes owed. In fact if the tax credit is more than your federal tax liabilty then the your will receive a check back for the excess. Example: if you are a first time homebuyer then you would be eligible for an $8,000 tax credit. Let's assume that your federal tax liabilty is $5000 for the year. Your liabilty would be reduced to zero, and you would receive a $3000 check from the IRS.
Other eligibility requirements apply, including income limits, but individuals who exceed the limit may be eligible for a partial credit, and buyers should seek advice from a professional tax advisor for specific tax calculations.
This legislation will help stimulate a significant level of home buying activity in the market and, more importantly, it will have a terrific impact on our economy. Given that many leading economists believe the U.S. economy is in the early stages of a recovery, experts don’t foresee the tax credits being extended beyond April 30, 2010, and caution all potential buyers that this is likely to be their last opportunity to take advantage of this generous tax credit.
According to the National Association of Realtors( NAR), about 1.4 million first-time homebuyers have qualified for the tax credit through August of 2009; NAR estimates that 350,000 of these buyers would not have purchased their homes without the credit.
Contact us today for more information on how you can benefit from this unique opportunity.
