The Clock is Ticking for First Time Homebuyers

Every year during the holiday season, some news items are released, analyzed, and quickly lost in the shuffle.

With so much attention placed on the housing market – and talk of an upcoming rebound, I wanted to take a moment and remind everyone of some important components within the government’s first-time home buyer tax credit, which was extended last fall by both the House and Senate.

Qualified buyers: you still have time to find your dream home and take advantage of this gift from Uncle Sam! Here’s the rundown:

Are more people eligible?
Yes. First time home buyers (buyers who haven’t owned a home in the past three years) are still eligible for a credit of up to $8,000. The bill created a new buyer category that allows existing homeowners or “repeat buyers” who have lived in their principal homes for five consecutive years (out of the past eight years) and are purchasing a new principal residence to apply for a credit of up to $6,500.

What are the income limits?
Buyers filing as single or head-of-household taxpayers can claim the full credit if their modified adjusted gross income is less than $125,000. Married couples filing joint returns are eligible if their combined income is less than $225,000. Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000, are eligible to receive a partial credit.

What are the new dates?
Last November, many news outlets referred to the credit as being extended through May, others are referencing June as the deadline. Specifically: to be eligible, binding purchase agreements must be signed by April 30, 2010 and deals must be closed by June 30, 2010.

What homes qualify?
All homes with a purchase price of less than $800,000 qualify. Vacation homes and rental property purchases are not eligible.

Is the credit refundable?
If the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference. For example: a first-time buyer qualifying for the full $8,000 credit who owes $5,000 in federal income taxes would receive a $3,000 refund. Qualified home buyers can take the tax credit on their 2009 or 2010 income tax return.

Does the credit have to be repaid?
Not unless the owner sells the home or stops using the home as a principal residence within 3 years after the date of purchase.

Looking Ahead…
We know that interest rates will always fluctuate and that the market will swing – but for the next few months, the tax credit will remain static. It’s one of the few “sure things” today – and if you qualify, take advantage of this free gift, because it won’t last forever.