Virginia Beach First time home buyers tax credit.
Once again, the Home ownership and Business Assistance Act of 2009 has implemented an extension to the first time home buyer tax credit to a maximum of $8,000. This particular part of the act applies only to first time home buyers, and they must be purchasing a principal residence. Vacation homes will not be qualified under this program. There is a program for repeat home buyers, which is up to a maximum of $6,500 which I will discuss later in this article.
To be qualified, the first time home must be purchased after January 1, 2009 and before the first of May 2010. If a binding contract is in hand by April 30, 2010 then the home owner has until June 30, 2010 to close the deal. With this new program, the Act has set the maximum income limit at $125,000 for a single person and up to $225,000 for a married person if they are filing a joint return.
The first time home buyer may purchase new construction or a resale home, as either one of them will qualify for the tax credit. The purchase date has been carefully described as the actual closing date. At closing, the title of the property will transfer to the first time home buyer. Young folks beware, as you may not qualify for the tax credit program if your parents are claiming you as a dependent.
I have referred to first time home buyer several times in this paragraph, and that means that the buyer has not owned a principal residence in the last three years prior to the purchase of this property. Be careful with this, as it also applies to your spouse, both you and your spouse must meet the first time home buyer qualification to take the tax credit.
The IRS is watching this rule very carefully, as last year more than 500 under age folks took the deduction and one was only 4 years old. Needless to say they will vigorously prosecute all violations.
The method of determination of the amount of the tax credit is determined by taking 10% of the purchase price of the home. For example if you purchase a home with a sale price of $70,000 then your tax credit will be equal to $7,000 and not the full amount of $8,000. If the sale price is $100,000 then you qualify for the full $8,000 tax credit and no more.
Even though the above examples are very simple, be sure to consult you tax advisor for specific details before you make any final decision as your specific circumstances may be different. Keep in mind that you cannot claim the tax credit for a future intended purchase, you must have actually closed and taken title to the property by June 30, 2010 to qualify.
The tax credit will be taken at the end of the year when you file your income taxes. To get an earlier benefit, you can change the number of dependents that you claim to increase your take home pay each month by the full amount of the tax credit that you will receive. I strongly recommend that you do not change your dependents without first consulting a tax advisor to make sure it is calculated correctly. An error in your dependent status could cause a large unexpected tax bill at years end.
An additional restriction in the new home purchase is that the home cannot be purchased from family members, or any of your ancestors such as parents or grandparents. This rule also extends to your lineal descendents such as grandchildren and children.
Now here is a really good deal. For example, assume that you only owed $5,000 on you income tax for the current year. So in that case how can you take an $8,000 tax deduction when you only paid $5,000. Its easy, just file the $8,000 deduction and you will actually get a cash payment of your original $5,000 plus an additional refund from Uncle Sam for $3,000. Now how can you beat that, huh?
Repeat Home Buyer Tax Credit (Move Up)
The Home ownership, and Business Assistance Act of 2009 has provide a tax credit in the amount of $6,500 for repeat home buyers (a repeat home buyer is defined as an existing home owner) purchasing a principal residence during the period November 6, 2009 through April 30, 2010.
The period can be extended until June 30, 2010 if a binding contract of sale is signed and ratified by April 30, 2010. The repeat home buyer may purchase any type of home to claim the lower tax credit up to $6,500.
A move-up buyer is defined as a long-time-resident when he/she has owned and resided in his home a minimum of the last 5 of the last 8 years prior to buying this new home. For married folks, both must meet the qualification as above. It is not mandatory that the new home be more than the old, therefore some buyers may be referred to as move-down buyers vice move-up buyers. It is expected that most will be move-up buyers.
Whether moving up or down, the tax credit will remain at 10% of the purchase price which is the same for the first time buyer. The main difference is that the max tax credit will be $6,500. You must remember, that the home purchased must not exceed $800,000. Homes in excess of $800,000 will not qualify for any tax credit.
The income limit for move-up buyers is $125,000 for single buyers, and $225,000 for couples that are filing a joint return. The same rule in regard to purchasing from family members applies here also.
James has been writing articles and publishing commentary for several years covering mainly topics of Virginia Beach Real Estate interest. Since his retirement from a very busy 33 year Naval Office experience, he specializes in Virginia Beach Foreclosures and has been called an expert in that field.