First Time Homebuyer Tax Credit Expiring Soon

While its true that the tax credit is expiring 4 months from now, you need to start looking today if you hope to receive the real estate tax credit. Most of the buy side transactions I have seen have taken extremely long to close sometimes up to 4 months, just because so many factors have been added to closing on property this year.

A long line of short-sellers, loan modification requests, and foreclosures have left banks understaffed and new regulations on who receives money has made it quite diffcult for even the best of borrowers to get a loan in a timely fashion.

Still, there is time to get the $8000.00 tax credit if you start today. I have prepared these tax credit rules on some research I did on the subject a few months back.

Rules to Receive the Credit

1. New Buyers Receive 8000.00: The credit is equivalent to 10% of the purchase price of the home--up to $8,000--and applies only to first-time home buyers and principal residences. But unlike an earlier $7,500 home buyer tax credit, this one does not have to be repaid.

2. First time buyers defined:  "First-Time Home Buyer" is someone who hasn't owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you've owned a vacation home--but not a principal residence--within the past three years, you would still qualify for the credit.

3. 2009 buyers only: Only those who purchase before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won't be able to take advantage of it. This means you must be closed on your sale transaction before December 1st. A property under contract is not a closed transaction.

4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.

5. Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't have much tax liability.

6. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)