Update: Home-buying Tax Credit til July 2010
If you are seeking the “8,000 Tax credit as a First Time home buyer” information. Find out more and learn about the other programs that we have available under this program. New home buyers would continue to get a tax credit till July 1st 2010.
The measure, extends the $8,000 credit for first-time buyers that is set to expire at the end of November and gives a credit of up to $6,500 to repeat buyers who have been in their home for at least five years.
The credit would apply to contracts entered into through April 30 and closed before July 1.
The home buyers’ credit would be available to individuals earning up to $125,000, or $250,000 for couples, up from $75,000 for individuals and $150,000 for couples under the current law.
Find out if you Qualify for the tax credit – Click Here
Questions and Answers
Q: Can you use the $8,000 Tax credit for the Down Payment on a FHA or Conventional Loan?
No – On all FHA and Conventional financing, you must have some “skin in the game” when buying a home. The tax credit is 10% of the purchase price up not to exceed $8,000 if you file jointly or $3,750 if you file as a single person.
Who is eligible to claim the $8,000 tax credit?
First time home buyers and Borrowers who have owned a home in the last 5 years purchasing any kind of home—new or resale—are eligible for the tax credit.
When is the cut off date that we need to put our completed application in to be eligible for the tax credit?
Currently, Network Funding, LP will take applications up until June 15th 2010, You must have a signed purchase contact on or before that date, however we can approve you without one. – It is important that you contact us today at 404.814.4634 and press #1 to speak with an advisor or the Home Financing Expert : Peter M. Knap at extention 706.
What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the (3) three-year period prior to the purchase. For married taxpayers, the law tests homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.
What types of homes will qualify for the tax credit?
Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses, and condominiums.
Are there income limits to determine who is eligible to take the tax credit?
Yes. Home buyers who file their taxes as single or head-of-household taxpayers can claim the credit if their modified adjusted gross income (MAGI) is less than $75,000. For married taxpayers filing a joint tax return, the MAGI limit is $150,000. The limit is based on the buyer’s modified adjusted gross income for the year that the house is purchased, except for certain purchases in 2009.
What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000.00are available for some taxpayers whose MAGI exceeds the phaseout limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.
Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625. Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
Does the credit amount differ based on tax filing status?
No. The credit is in general equal to $8,000.00 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files their taxes as “married filing separately” (in effect, filing two returns), then the credit of $8,000.is claimed as a $3,750 credit on each of the two returns.
Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $8,000 tax credit?
In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $8,000. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price.
I heard that the tax credit is refundable. What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($8,000 minus the $1,000 owed).
What is the difference between a tax credit and a tax deduction?
A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $8,000 tax credit would owe nothing to the IRS.A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,125 (15 percent of $8,000 ), or lowered from $8,000 to $6,375.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
No. The tax credit cannot be combined with the MRB home buyer program.
I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phase-out would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
What is the current credit score that we need to be eligible to buy a home?
Customarily, you will need a mid credit score of 620 or above, however, if your score is between 590 to 619 and those scores are due to judgments, or collections , or if you were only an authorized user on a bad debt, we might be able to get you approved. If you have the assets to pay off bad debt or lower your credit card balances before closing- call us at 404.814.4634 and press #706. If you credit is low because of a recent Bankruptcy , or currently late on bills, you must be current in the past 12 months in order to get an approval.
Where can I locate more information on the eligibility of Tax credit with the IRS?
Please click here and we will direct you to the page specifically to IRS Tax credit Eligibility
Wall Street Journal article
Like article in regards to extending the tax credit to 2010.
Find out if you Qualify for the Tax credit – Click Here
If you are thinking about purchasing a new home, don’t wait until you find the perfect home to get prequalified! Make sure your credit is healthy and find out how much you can qualify for before you find the home of your dreams. This helps insure that you not only choose a home in the right price range, but help avoid falling in love with a home that you can’t afford!
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