You have probably heard a lot of talk about the first-time homebuyer tax credit that the government is offering.
The first question we have to answer is: What is a first-time homebuyer? It is a person or couple, who has not owned a primary residence three years prior to the date of the purchase of a home.
The first-time homebuyer tax credit prior to 2009 was a maximum of $7,500, however the problem with the program was that it was not a true tax credit and in fact, could be considered a loan. The $7,500 had to be paid back over 15 years.
The new and improved program for 2009 is a true tax credit up to $8,000 or 10 percent of the purchase price (whichever is less), however, there are certain caveats that need to be addressed.
To be eligible for the full benefit, a single person may only earn up to $75,000 a year. There are reduced benefits up to a $95,000 cap.
Couples may earn a maximum of $150,000 for full benefits and may be eligible for reduced benefits if they earn up to $170,000.
The home to be purchased must be the main home or principal residence of the buyer, which is generally considered as the home where you spend 50 percent or more of your time.
Vacation homes and rental properties are not eligible. New construction is eligible and for the purpose of this program, the purchase date is considered the date you move in. Of course, the property must be located within the United States.
The first-time homebuyer tax credit program expires on Nov. 30, 2009 and you must have closed escrow by that time.
In order to avoid repayment of the tax credit, you must occupy the home for three years.
Also important to note is that you may not purchase the home from a close relative.
The above information is accurate based on information available as of Feb. 23.
As with any tax law change, check with a tax adviser if there are any questions regarding using this provision.
In checking our local housing inventory, there are numerous homes on the market where the $8,000 tax credit would cover the full down payment if utilizing an FHA loan. This is a time of opportunity.
Ray Pugel is a designated broker for Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.