Home Buyer Tax Credit — The Basics
In late 2009, Congress voted to expand the Home Buyer Tax Credit, making it available not only to first time home buyers, but also to existing homeowners seeking to purchase again. The expanded credit allows recent homeowners (within the last three years) to obtain up to $6,500 in tax credits when purchasing a home. First time home buyers still receive a credit of up to $8,000.
Inside the government, talks have shifted to the jobless rate and possible inflationary precautions, so there is no guarantee the home buyer tax credit will be extended again. In order to benefit from the tax credit, a buyer must be in contract to purchase a home by April 30, 2010, and the transaction must settle by June 30, 2010. To qualify for the credit, individuals must have an adjusted gross income less than $125,000 while married couples or those filing jointly can have up to $225,000 of adjusted gross income (for homes purchased after November 6, 2009). In addition, the home being purchased cannot be more than $800,000 in price.
Partial Credit
The expanded tax credit also allows those with elevated income levels to receive the credit at a discounted level. If your AGR falls between $125,000 and $145,000 for individuals ($225,000 to $245,000 filing jointly) you may be eligible to receive a partial credit. The calculation works like this:
- First, it is important to understand the phase out limit for partial credit, which is $20,000 above the general income limit ($145,000 for singles,and $245,000 for joint filers).
- Next, you need to determine the buyer’s ratio of income overage relative to the phase out limit. Say you had a couple with gross income of $239,000, or $14,000 over the general limit ($239,000 – $225,000 = $14,000). Since the phase out for partial credits is a range of $20,000 over the limit, the overage ratio in this example is calculated as 70% ($14,000/$20,000=70%).
- Then, subtract the overage ratio from 100% to get the ratio of credit the individual or couple can claim. In our example, the couple is over by 70%, so they are eligible for a 30% credit (100% – 70% = 30%). Therefore, if they were first time homebuyers purchasing a home priced higher than $80,000, they would receive a credit of $2,400 ($8,000 x 30% = $2,400).
- Single buyers can use the same process to determine their eligibility for partial tax credits, as applicable.
Home prices are relatively low now, compared to prices for the average home just a few short years ago. Combine that with the ability to save up to $8,000 in taxes and you have two great ways to save money while securing a home for you and your family.
In short sales home purchase, where the contract has been signed up by buyer and seller, on february, but not yet for the bank, there is some chance to qualify for the tax credit first time purchase, or to get some extension time further april 30-2010? we can qualify without the sign from the bank? The short sales, takes so long,
thanks.
If you have a signed purchase and sale agreement, otherwise known as being “in contract”, by April 30th and close by June 30th you should be fine. If you have mutual agreement between buyer and seller you should make sure the contract is signed and push the bank to close their end of the transaction by June 30.
If you are an active member of the military, reserves, or national guard, as well as certain government agencies, you can also get an extra year, meaning the credit is extended to April 30, 2011 to close by June 30, 2011.
thanks, we are not in contract until the bank sign up,that says my realtor. My doubt is, if families like mine, that we are waiting for the bank, only for one signature, and this comes after april 30, would not qualify only because the bank take so long to review the files, that’s not nice. We have still one month more, i hope we get the contract on time. REMEBER IS A SHORT SALE. Thanks, again.
Remember, the bank holds the mortgage, they don’t possess the title to the home, at least not yet. You are well within your rights to ask for a signed contract since the seller has agreed to your price. My guess is the agents are just being lazy not filling it out because they know the final sale hinges on the bank.
Either way it doesn’t matter if the bank can’t finish the sale by June 30th, but you can still get that contract just in case. That way, it stops them from potentially selling it to someone else with a higher offer while you’re negotiating with the bank.
My daughter and husband has don everythingasked of them since April 2, and USDA will not close by June 30th, they have not done there job at all and this has drug on way to long is there any help from instititions not doing their jobs? and making them miss put on 8000 $?