Time is running out for homebuyers to take advantage of the First-Time Home Buyers Tax credit created to stimulate the real estate market. The tax credit is equal to 10 percent of the home’s purchase price, up to a maximum of $8,000. Qualifying participants claim the credit on their tax returns.
More than 1.4 million first-time homebuyers have taken advantage of the tax credit to date, according to the IRS. Six bills now before Congress could extend the tax credit at least until the end of 2009, but there is no guarantee.
Your BBB offers the following guidance on the First-Time Homebuyers Tax Credit:
Don’t Rush In. Just because the tax credit is set to expire on Nov. 30 doesn’t mean you should buy a house you don’t love. Taking the time to find the right house is more important than receiving $8,000 toward the purchase of a house you end up hating or can’t resell.
Who’s Eligible? To take advantage of the tax credit, a first-time homebuyer is defined as an individual who hasn’t owned a principal residence in the previous three years. An individual qualifies if she or she owns a vacation home, however. Neither party in a married couple qualifies if either has owned a primary residence in the previous three years.
Income Requirements. To receive the maximum credit, the modified adjusted gross income must be $75,000 or less for a single buyer and $150,000 or less for a couple. Single buyers earning between $75,000 and $95,000 and couples earning between $150,000 and $170,000 are eligible for a reduced credit.
Monetizing the Tax Credit for Use Now. The Secretary of Housing and Urban Development announced that buyers using FHA-insured mortgages can apply their anticipated tax credit immediately toward the purchase of a house. This is achieved through bridge loans by nonprofits or an FHA-approved lender.
Prepare to Stay a While. Homebuyers must remain in the house for three years or return the credit. There are exceptions, including death or divorce.
Start With Trust. For more advice on buying a home, visit wynco.bbb.org or check out BBB’s Insider’s Guide to Success on Buying a Home available at bookstores nationwide and on Amazon.com. You can also call the BBB at 970-484-1348 or 800-564-0371 for reliable consumer tips and information.