$8000 Tax Credit for First Time Home Buyers
For First Time Home Buyers Who Are Under Contract on a Home by April 30,2010
Great news for first time home buyers! In February 2009, the federal government accepted, as part of their stimulus plan, a program to give all first time home buyers up to an $8000 tax credit when they purchase a home. What’s the catch? There isn’t one. The government knows that home ownership is good for the economy, and in their attempts to stimulate the economy, they want to offer extra incentives to encourage people to buy.
How Does it Work? The program allows a buyer to take a tax credit which is equal to 10% of the purchase price of the home OR $8,000, whichever is lower. For example, if you buy a $60,000 home, then you would qualify for a 10% tax credit ($6,000). If you buy a home that is sold for $80,000 or more, then you qualify for a flat $8,000 amount.
Who Can Qualify? ANYONE who has either never owned a home or has not owned a home within the past 3 years. To qualify for the full $8,000 credit, home purchasers that are single need to make $125,000 per year or less, and married couples need to make a combined income of $250,000 or less. If you make more, then you may still be able to qualify for a partial credit.
What’s the Timeline? To qualify for this credit, you need to be under contract on a home by April 30,2010, and you need to close on the purchase by June 30,2010. REPEAT: You MUST be under contract on a home BY April 30, 2010 to claim this credit. It is incredibly unlikely that this tax credit will be continued after this date.
Do You Have to Pay this Back? No. If you own the home for at least 3 years, then the $8000 tax credit is yours to keep. There are some penalties if you sell the home before the 3rd anniversary of your purchase date, however.
When Do You Receive the Credit? You will receive your tax credit on or around April 15th, 2011, when you file your income taxes for the 2010 year. See your CPA for complete instructions.
EXAMPLE 1: If normally you would owe the government $10,000 in taxes, then you would be able to use the $8000 to offset your taxes, meaning that you would only have to pay $2000 in taxes to the government.
EXAMPLE 2: If normally you would owe the government $2000 in taxes, then you would be able to use the $8000 to offset your taxes, and the government would SEND you a check for $6000.
EXAMPLE 3: If normally you would RECEIVE a tax refund of $2000 from the IRS, then they will add in the $8000, meaning that you would receive a tax refund of $10,000.
This is a never before seen government program, and it's likely that we won't see another program like this for a few decades. When you combine this tax credit with low interest rates, and the "buyer's market" that we are currently in, there has never been a better time to buy a home in the Austin area!