Tax Credit for First-time Homebuyers Extended Into 2010
By Kathy Bartle
11/6/2009
It’s official! President Obama has signed a bill that extends the tax credit
for first-time homebuyers into the first half of 2010. In addition, the
extension also opens up opportunities for others who are not buying a home for
the first time.
To help you understand what the new tax credit details mean to you please
read the overview of the new tax credit deadline, income caps, and more below.
November 6, 2009
Tax Credit for Homebuyers
First-Time Homebuyers (FTHBs): First-time homebuyers (that
is, people who have not owned a home within the last three years) may be
eligible for the tax credit. The credit for FTHBs is 10% of the purchase price
of the home, with a maximum available credit of $8,000.
Single taxpayers and married couples filing a joint return may qualify for
the full tax credit amount.
Current Owners: The tax credit program now gives those who
already own a residence some additional reasons to move to a new home. This
incentive comes in the form of a tax credit of up to $6,500 for qualified
purchasers who have owned and occupied a primary residence for a period of five
consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for
the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no
later than April 30, 2010 and close no later than June 30, 2010.
Tax Credit Versus Tax Deduction
It’s important to remember that the tax credit is just that… a tax
credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax
reduction, rather than a reduction in a tax liability that would only save
you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer
were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000,
she would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can
receive a check for the credit if he or she has little income tax liability. For
example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is
liable for $4,000 in income tax, she can still receive a check for the remaining
$4,000!
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