The American Recovery and Reinvestment Act of 2010 has authorized a tax credit of up to $8,000 or 10% of the sales price for qualified first time home buyers purchasing a primary residence home on or before April 30, 2010 or purchased by June 30, 2010 with a contract date of April 30, 2010. Eligible active duty military stationed overseas can obtain an additional year's extension for this program. This tax credit is different from the previous $7500 tax credit because it is not required to be re-paid provided the buyers stay living in the home for at least 3 years.
The American Recovery and Reinvestment Act of 2010 and the Worker, Homeownership, and Business Assistance Act of 2009 has extended the First Time Homebuyer's tax credit of up to $8,000 or 10% of the sales price for qualified first time home buyers purchasing a primary residence home. Those who wish to participate must be in contract by April 30, 2010 and close no later than June 30, 2010. Eligible active duty military stationed overseas can obtain an additional year's extension for this program. This tax credit is different from the previous $7500 tax credit because it is not required to be re-paid provided the buyers stay living in the home for at least 3 years.
The extension of the original tax credit also put into place a tax credit for Long Time Homeowners who wish to purchase a new primary residence. They can receive up to $6500 in the same type of refundable tax credit provided they can evidence they've owned and lived in a home for 5 consecutive years of the last 8 years.
In regards to the First Time Homebuyer Tax Credit, the first thing to clarify is the definition of a First Time Home Buyer. Contrary to common thought, a first time home buyer is someone who has not owned a primary residence in the past 3 years. If a second home or investment property was owned during the last 3 years, it does not disqualify you. If you've owned a home more than 3 years ago, but have not owned a primary residence within the most recent 3 years, you would qualify. Below are some scenarios to further clarify.
1. If you owned a second home or an investment property in the last 3 years, but not a primary residence, you are qualified.
2. If you owned a primary residence more than 3 years ago, you would qualify.
3. If you are purchasing with someone else, but not married, and one of you is a qualified first time homebuyer, the first time homebuyer can take the credit.
4. If you are married and file joint tax returns and one of the spouses has owned a home in the past, you do not qualify.
5. If you are married and file separately, and one of the spouses is classified as a first time homebuyer, you would qualify for 50% of the credit.
One of the greatest things about this tax credit is it is classified as a "refundable" tax credit. As a tax credit, the intention is to reduce the amount owed to the IRS in taxes. It is not specifically an additional tax deduction, but an actual credit to reduce the tax liability. For instance, once your CPA or tax preparer calculates your annual taxable income, and then the overall taxes you would owe, the tax credit would then be applied. So if your overall tax owed is $3,000, and you purchased a home over $80,000, then you would be able to apply the $8,000 against the $3,000 overall owed and then receive the remaining $5,000 in a refund check. This calculation will then also affect your regular refund amount based on how much you had deducted from your regular paychecks throughout the year. If you owe $0 in taxes without this tax credit, you can receive the full $8,000 as a tax refund.
The other great thing about this tax credit is the IRS is allowing those who purchase in 2009 to apply the tax credit, if they wish to their 2008 tax returns being filed. If you have already filed, you have the option of filing an amendment to those returns to receive the funds as quickly as possible rather than waiting until you file your full 2009 tax returns.
Remember, this tax credit can only be filed once you purchase a home. We do not currently have the ability in Arizona to utilize this tax credit for down payment as you have to purchase first before you can get it.
The maximum tax credit allowed is the lesser of 10% of the sales price up to $8,000.
Income restrictions do apply for the full credit. Single individuals are capped at the modified gross income of $75,000 and married couples are capped at $150,000. There is a phase out calculation in which even if you exceed these amounts, you still may qualify for a portion of the credit.
There are certain restrictions that may apply. We encourage everyone to seek out the expertise of their tax preparer/CPA to ensure they are qualified for the credit and approximately how much. For additional information about this and other buying incentives and down payment assistance programs, go to www.AZDownPayment.com!
This is a further incentive to first time home buyers as well as long time homeowners to venture into the purchase of their first home. Rates are incredibly low, prices are low, and now even your tax liability can be lowered. All the more reason to Apply Now!
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