Is it true, did the government actually extend the tax credit? The answer is “Yes” they did! Officially it is known as the Worker, Homeowner and Business Assistance Act of 2009. Originally the program was to run from January 1, 2009 through November 30, 2009. The extension, however, took effect November 6, 2009 and will run through April 30, 2010. Some circumstances will allow for the end date to extend to June 30, 2010. The extension allows for an increase in income limits for eligibility and adds a benefit for current homeowners as well.
The program was originally designed to allow for a tax credit for first time homeowners. A “First Time Homeowner” is defined as someone who has not owned a principal residence in the last three years. If married, neither spouse can have owned a principal residence in the last three years. Now, current homeowners are also eligible for a tax credit if they have lived in their current principal residence for five consecutive years of the last eight.
The modified extension pertains to those individuals who earn less than $125,000 annually or married couples earning $225,000 jointly. Reduced allowances are available for individuals with a modified adjusted gross income of $145,000 and couples earning $245,000. It is important to contact your tax advisor about your specific situation. Home purchases must be closed with title transferring on or before April 30, 2010 to be eligible. Though the principal residence cannot be purchased from a family member, the definition of principal residence does include many options home buyers. Single family dwellings, condos, townhomes, manufactured homes and even houseboats can all be considered for the tax credit. New construction also qualifies for the credit as long as possession occurs before the deadline or a binding sales contract is in effect prior to the deadline. The tax credit for first time home buyers is equal to 10% of the purchase price up to $8,000 and current homeowners are also allowed the 10% up to $6500 in credit. The maximum allowed purchase price for either is $800,000.
Claiming the tax credit is as easy as adding the amount determined by completing IRS form 5405 and entering the amount on line 67 of your 1040 income tax form for 2009 (you may also claim it on your 2008 taxes by adding the amount to line 69 of your 2008 1040). For those purchasing in 2010, make sure to contact a tax advisor to determine the appropriate line to enter the information. There are no applications or pre-approval necessary; however, it is important to make sure you qualify for the credit. Attach a copy of your closing statement (HUD-1 settlement form) to your tax return as proof of the home purchase.
If waiting until you file your taxes seems a daunting task, there is another option for prospective buyers. Qualified homebuyers can reduce the amount of income tax withholding on their W-4 or through quarterly estimated tax payments up to the amount of the tax credit. This money can then be applied to the down payment. If the tax credit qualified home purchase does not take place, then you will be responsible for repayment of the income tax along with possible interest charges and penalties. HUD has also decided to allow buyers using FHA Insured mortgages to preemptively apply the anticipated credit to their home purchase. This is done by FHA approved lenders allowing short term loans up to the maximum amount of the tax credit. These funds can be put toward certain expenses such as down payment and closing costs. Some government and housing finance agencies may also be issuing additional tax credit loans to allow home buyers to reach the FHA requirement of a 3.5% down payment. Make sure to ask your lender about all possible tax credits or discounts available.
The tax credit does not need to be repaid by the homeowner; however, he or she must occupy the home for three years. If the property is sold prior to the three year mark, the full amount of the credit will be recovered at the time of sale. For more information about the tax credit, visit the IRS website at www.irs.gov/newsroom/article/0,,id=204671,00.html for more details.
Contact Cheri Wickman at cheri@homewaters.net or 231-392-9365 to start looking for your new home!
No comments:
Post a Comment