Thursday, March 12, 2009

First-time Buyer's Guide to Understanding the Federal Income Tax Credit

Are you afraid to buy a home now worrying that you might not be able to afford it because of the crash in our economy? No need to worry! The IRS new stimulus plan might help. This policy, effective for purchases on or after January 1, 2009 and before December 1, 2009 has become a hot topic.

Let us make it simple for you...It is a great time to buy a home now! Not only are interest rates lower than 5%, there is also an offer of tax credits. $8,000 is the maximum amount a homeowner can get for credit, no matter how much the purchased home may be. We know that last summer, the refundable credit required a repayment. But the new stimulus plan promises nothing but a refund. There is no repayment by the homebuyer whatsoever. It is just pure heavenly income tax credit.

And who may be qualified for this income tax credit?

  • Anyone who purchases a single-family residence, as long as it is the homebuyer's principal residence. This includes condominiums, townhouses, or a co-op.
  • First-time homebuyers. Meaning, those who have not owned a home in the 3 years before purchasing an eligible property.
  • A homebuyer who utilizes revenue bond financing.
  • For a full refund in tax credits, the homebuyer may have a total annual taxable income of no more than $75,000 ($150,000 on a joint return).
  • For a reduced tax credit, the homebuyer may have a total adjusted income up to $95,000 ($170,000 on a joint return) or those who qualify as a first-time homebuyer. Also for the first-time homebuyers, if the $8,000 is greater than the tax you owe, then you will get a refund check for the difference.
  • A home buyer meeting the basic requirements who purchase before December 1, 2009

Obviously, there are many homebuyers who will benefit from these tax advantages when buying real estate in 2009. We advise prospective home buyers to talk with their tax professional first and then see us about finding a home before the deadline. In fact, this new home buying incentive may already be taking effect. According to the California Association of Realtors, buyers took advantage of a 41 percent decline in the median price of an existing home as California home sales doubled in January from a year earlier. We hope this guide will help those considering the purchase of a home in 2009. Please contact us with any further questions.