$8000 or $6500 Home Purchase Tax Credit is Great
10 Keys to Tax Credits for Primary Residence Home Purchase HR 3548
Nov 6, 2009
For those who need or want a new or older home for their primary residence, the federal government of the U.S. is encouraging this with either a $8000 or $6500 tax credit. The bill was signed into law on November 6, 2009 and is, therefore, effective immediately. Important highlights, details and insights of H.R. 3548, The Worker, Homeownership And Business Assistance Act Of 2009, are summarized here.
Tax Credits $8000 and $6500 and Wise Home Buying, H.R. 3548
Listed below are some very important first points and principles to keep in mind when considering a home purchase, and when seeking the credits of H.R.3548.
- A home purchase typically is the largest expense and loan a person has in a lifetime.
- Home monthly note payments consume 20-30% of a typical homeowner's take home pay.
- List prices on homes are just that — a listing price.
- List prices are negotiable, and the current market, filled with foreclosed and non-foreclosed properties, is ripe for offers, regardless of the presence or absence of tax credits.
- Buyers' agents are excellent, and should be used by all buyers.
- Property evaluations and comparative neighborhood figures must be used.
- Property inspection should always be included in the purchase agreement and contract.
- All contracts written should have protective wording to permit escape from the contract should certain conditions or stipulations not be met such as: contingent upon purchaser obtaining 30-yr financing at 5.25%; subject to house passing inspection with next two weeks of this contract; contingent on owner contributing $5000 to closing cost.
$8000 and $6500 Tax Credit for Home Buyers, How it Works, H.R. 3548
These are the most important points about the tax credit:
- Home purchase must be primary residence.
- Secondary residences, vacation homes, or properties purchased for rental do not qualify.
- First-time homebuyers will be eligible for $8,000 tax credit.
- Persons who have lived in their current private residence for at least five years may sell their current residence, purchase a new house, and receive a credit of $6,500.
- Deadline: April 30, 2010 is the last valid date for a Purchase Agreement signing.
- Closings must occur on or before June 30, 2010.
- Annual income limits: individuals qualify up to $125,000 income, and joint filers up to $225,000 qualify for a full tax credit.
- Reduced credits apply to Individuals with incomes up to $145,000. Joint filers with incomes up to $245,000 qualify for reduced credits.
- Military deadline extension: A one year extension is given to members of the Armed Services who have served outside the U.S. for at least 90 days during the period Jan. 1, 2009, to May 1, 2010
- IRS questions and answers relating to the 2009 home credit are available. When the 2010 information is available it will be posted here also.
$8000 and $6500 Tax Credit Application Process, H.R. 3548
A specific claim form will be available for the 2010 tax year. This credit will apply directly to the taxes due on the federal income tax return. Should the credit be greater than taxes owed, the government will issue a check refund. Taxpayers who want immediate refunds can amend their tax returns for 2008 to claim the credit.
Loan Modification Adjustments and Refinancing Possibilities
For those not eligible or qualifying for the above tax credit, consideration should be given to loan modification, adjustment or refinancing options. Such possibilities are important and relevant.
This tax credit will cost the federal government at least 10 billion dollars and will add to the national debt. How much stimulation of the economy will occur is unknown.
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