Save Now With the Homebuyers Tax Credit
Now Through April 30, 2010 qualified first-time home buyers can receive a credit of up to $8,000. Other qualified buyers can receive a credit of up to $6,500 for homes purchased between November 7, 2009 and April 30, 2010. Don’t miss this opportunity!
Am I Eligible?
First-time homebuyers who purchase a primary residence on or after April 9, 2008 and before April 30, 2010 are eligible. If you (and your spouse, if married) have not owned a primary residence for a 3-year period before your purchase, and you have never taken advantage of the DC first time homebuyer credit, you qualify as a first-time homebuyer. Starting November 7, 2009, buyers who have lived in their primary residence for five of the last eight years can also qualify for a tax credit. The credit for repeat buyers also expires April 30, 2010.
Current law allows potential buyers who enter into a written binding contract by April 30, 2010 to close by June 30, 2010 and still claim the credit.
How does it work?
Like all tax credits, it will directly reduce the total amount of taxes you owe. When you file your taxes, for the year you purchased your home, you will be able to subtract the amount of the credit from your Federal income tax liability, increasing the size of your refund or reducing the amount you owe. For example, if your NORMAL tax return shows that you owe $2,000 in taxes, with this credit, your tax liability could be lowered by $8,000 – which means, in this example, you instead will get a $6,000 tax REFUND check from the IRS.
Available at Closing!
When the credit was first passed, money was not available until a buyer filed a tax return after the home purchase. Several states – 18 and counting – creatively found ways to make cash available to buyers at closing through their state housing finance agencies. The Federal government followed suit. On May 29, 2009, the Department of Housing and Urban Development announced guidelines for FHA lenders that enable them to make the credit available to buyers to cover closing costs or a down payment above the 3.5 percent required for an FHA insured loan. This means the credit can be available at closing regardless of where you’re purchasing if your lender participates in this program. Check with your
state housing finance agency as well as your lender for details.
How big is the tax credit?
The tax credit is equal to 10% of the purchase price of your home up to $8,000 for first-time buyers and up to $6,500 for MOST OTHER buyers. The full credit is available for single individuals whose adjusted gross income is less than $125,000. If your adjusted gross income is greater than $125,000 and your home purchase qualifies you for the full credit, the credit phases out at $145,000. For married couples filing jointly, the credit begins to phase out at an adjusted gross income of $225,000 and it phases out at $245,000.
What else is new?
Income limits have been raised for the extended and expanded tax credit (effective November 7, 2009). To qualify, the purchase price of the home cannot exceed $800,000. An earlier version of the tax credit had a payback provision. The credit does not need to be repaid for purchases in 2009 and 2010, but a mild recapture provision remains. If you sell your home within 3 years of purchase, the entire amount of the credit is recaptured, that is, the government takes it back. Also, dependents are not eligible for the credit as of November 7, 2009. Finally, purchase documentation must now be included with the tax return in order to claim the credit.
Are there other conditions I should know about?
- You cannot claim both the DC and the national First-time Homebuyer tax credit.
- Purchases by non-resident aliens are not eligible.
- 2009 and 2010 purchases financed by proceeds from a qualified mortgage issue are eligible.
- Any single family residence located in the United States that will be used as a primary residence and is purchased for $800,000 or less is eligible. Generally, a primary
residence is the place where an individual spends most of his/her time. This includes single-family detached homes, condos or co-ops, townhouses or any similar type of new or existing dwelling. - The credit will not result in an individual owing additional federal taxes under the Alternative Minimum Tax.
- Home purchases between relatives and other gifts of residences are not eligible for the credit.
- Other tax benefits of homeownership are still in place. The mortgage interest deduction, capital gains tax exclusion, and property tax deduction are some well known examples.
- There is a recapture provision if you sell the home within three years of purchase.
Source: NATIONAL ASSOCIATION OF REALTORS®
For more information about the tax implications of the credit and your home purchase, please consult a tax professional.
George Alexiou is a licensed San Diego Real Estate Broker and a San Diego REALTOR® who has the Accredited Buyer’s Representative (ABR®) designation. REALTORS® holding the ABR® designation have completed highly specialized training in representing home buyers.
San Diego Home Sales for August 2009
San Diego home sales that closed during August 2009 for resale attached condos, studios, lofts and townhomes and detached single family homes as reported through the Sandicor and the San Diego Association of Realtors were as follow: Read more
San Diego Home Sales for July 2009
San Diego real estate sales that closed during July 2009 for resale attached condos, studios, lofts and townhomes and detached single family homes as reported through the Sandicor and the San Diego Association of Realtors were as follow: Read more
Current Real Estate Market (August 2009)
Are you still wondering when the right time to buy a house or condo in San Diego is going to be? How does “NOW” sound? or “Tomorrow and every day that passes could most likely mean that you lost the train? and this time “loosing the train” doesn’t have the same meaning as when you heard it 4-5 years ago during the so called “real estate bubble”!
Existing home sales in the San Diego County, in number of units sold, are forecasted to be at their highest level since 2005 and bank owned (REO) homes seem to be sold as fast as they come on the market with multiple offers, most way above the list prices. Today there are 38% or 10,000 less home listings in the San Diego MLS database than there were just a few months ago (seems like yesterday)!
As you can see on the chart above the current Housing Affordability Intex is at an all-time high at today’s low interest rates combined with the low home prices, which means that more people can afford to buy a home today than ever.
Median homes prices have been steadily rising since March when in my opinion San Diego home prices hit the bottom at $175,750 for condos and townhomes and at $325,000 for detached homes. Median prices in San Diego on existing home sales that closed escrow in July were $210,188 for condos and townhomes and $371,000 for detached homes. Please note that homes that closed escrow in March were actually sold in January or February and homes that closed escrow in july, were actually sold in May or June.
The best values can still be found among the bank owned (foreclosure) properties in San Diego, but seeing the number of offers that these type of homes are receiving as they come on the market, I believe that the longer you wait for the home prices to further fall, the more you’ll end up paying for your home!!!
The time to buy a home in San Diego was yesterday… What are you waiting for?
Instant Market Trends Tool
Not sure if you end up with more money or less, if you sold your home today and bought another one? Get an instant market trends snapshot showing prices in your old and “new” neighborhood!
See what is selling… See if prices have gone up or down… See prices of other homes likes yours…
Instantly see an estimated value of how much your home is worth in today’s San Diego real estate market!
After a couple months of testing we now have added this new useful tool to our San Diego real estate website and it is available to you as an addition to the other home search tools!
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