As you probably have already learned, the first time home buyer tax credit, a part of the American Recovery and Reinvestment Act, was extended in November 2009. This credit, which gives homebuyers the opportunity to take advantage of a tax credit of up to $8,000 for purchasing their first home, was set to expire on Nov. 30, 3009.
Now, not only has the credit been extended to April 2010, a provision was added that gives current homeowners the ability to take advantage of a $6,500 tax credit for upgrading to a bigger home. With some much more going on, it’s good to know just how you can benefit the most from this new-and-improved tax credit. So let’s get started!
Understanding What You’re Eligible For
The first way to get the most out of this tax credit is to understand exactly what you’re eligible for. Since there are now two components to the credit, there’s more to consider. Let’s take a closer look at eligibility requirements:
- Buying your first home (max. credit $8,000): If you’ve never owned a home – or haven’t owned one in three years – then you could take advantage of this credit if you have an adjusted gross income that does not exceed $75,000 as a single tax payer or $150,000 as a married couple.
- Buying a bigger home (max. credit $6,500): The new element of the tax credit allows current homeowners to upgrade to a bigger home. However, in order to qualify, their adjusted gross income must be less than $125,000 for singles and $225,000 for married couples.
If you’re buying your first home, you are allowed to take a tax credit of up to 10 percent of the new home’s purchase price up to $80,000. In other words, the maximum for the first time home buyer tax credit is $8,000. If you want to upgrade to a bigger home, your maximum credit will be $6,500.
Making Sure You Consult the Right People
When you’re branching out to find a new home, you don’t want to spend your money only to find that you can’t take advantage of the credit. This is why it’s good to consult all necessary parties to make sure you’re making the right choices along the way. This would include, communicating with:
- Your tax preparer: The person who handles your taxes would be able to make sure your adjusted gross income meets the requirements to help you qualify for the credit.
- Your mortgage lender: By consulting your mortgage lender, you could get help choosing the appropriate loan program for you – one that may even allow you to finance the closing costs or even accept a contribution from the seller.
- Your realtor: When locating a home, you want the help of a competent realtor who could help you find the best home for your needs, while also getting the most out of the tax credit.
By consulting these three facets of the housing/tax industries, you could increase your chances of getting a great home at a great price, while ensuring that you can obtain the credit.
Keeping Track of Deadlines
The deadline to take advantage of the extended first time home buyer tax credit is April 30, 2010. This means that you would have to sign on the dotted line for your home by this date. However, the date to actually close on the home is 60 days later on June 30, 2010.
Because it could take many months to locate a home and 45 to 60 days to close, you want to give yourself plenty of time to shop. Also, you want to make sure you have loan program that could ensure you will pay the closing costs before June 30. And of course you want to make sure that your tax paperwork is in line so that you could actually get the credit you’ve worked so hard to obtain.
Watching Out for Tax Fraud
With so many people interested in taking advantage of the first time home buyer tax credit, there are undoubtedly going to be scam artists out there ready to take advantage of naïve individuals with money to give away. This is why it’s important to make sure you’re not one of them.
To make sure you’re dealing with reputable realtors, it’s good to check out the National Association of Realtors and the National Association of Home Builders. If you’re not sure about the advice you’ve been given by a tax person or company, talk to the IRS via phone or through a local office.
In this tough economic time, it’s more important than ever that you’re able to gain up to $8,000 in tax credit, especially if you were planning to buy a house anyway. So before going out to buy your first home – or an upgraded one – it’s time to do your research. Then you can feel confident that you’ve gotten the best out of your first time home buyer tax credit.