OfflineCurrently it’s a great time to be a first time homebuyer on the Main Line, or any where in the United States for that matter. The main reason being the new first time homebuyers $8000 tax credit that is retroactive to January 1, 2009 and lasts until November 30, 2009. How does the $8000 tax credit work? Basically, if you purchase your first home within the time period mentioned above, when you file your taxes next year you will receive a refund check for $8,000 if you do not owe any taxes. If you owe $3000 in taxes then you will receive a refund check of $5000. Unlike the first time homebuyers $7500 tax credit that went into effect April 8, 2008, you do not have to repay this tax credit back as long as you remain in the home for three years. This tax credit, along with 30-year interest rates being at 4.98% should remove any doubt that this is a great time to purchase your first home on the Main Line.
If you have never owned a home or if you have not owned a home or had any ownership interest in a home in the past three years, then you are considered a first time home buyer. If you are married, both parties have to be first time homebuyers. The home you are purchasing has to be where you will reside over 50% of the time and within the United States. It can be a condo, townhouse, co-op, or a single-family residence. If the home is new construction you have to be moved in by December 1, 2009. It cannot be a vacation home or rental property. The purchase price has to be over $80,000 to receive the full $8000 credit. If the purchase price is less than $80,000 then the credit is 10% of the purchase price.
There are some exclusion’s however. Even if you are a first time homebuyer, you will not qualify for the tax credit if your modified adjusted gross income is above $95,000 or if jointly it is above $170,000. You are also excluded if you have purchased your home from a close relative such as a parent, grandparent, spouse, child, or grandchild. Also, you cannot be a nonresident alien. The good news is that most first time homebuyers will qualify and will receive a huge benefit from purchasing their first home in 2009.
The new $8000 first time homebuyers credit, historically low interest rates, large inventory of homes at great prices makes this the best market in a long time for first time homebuyers on the Main Line.
"If you cannot do great things, do small things in a great way.”
Napoleon Hill quote
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"
The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
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Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Lukewarm reception
The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.
"[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."
Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.
"If you cannot do great things, do small things in a great way.”
Napoleon Hill quote