Home Buyer Tax Credits Explained

Homebuyer tax credits are made available for Americans purchasing a home. Originally, this was applied to homebuyer made from April 9, 2008 to July 1, 2009. However, President Obama extended the original time frame to May 1, 2010 and gave buyers until end of June 2010 to close the transaction. Additionally, it has been extended to September 30, 2010.
Those who qualify for this tax credit are homebuyers defined by law as people who have not owned a primary residence during the three-year period prior to the purchase. They could qualify for up to ten percent of the home’s purchase price, with a maximum of $8,000. Current homeowners living in their primary residence for five years in a row out of eight and purchasing a home to be their main residence may qualify for ten percent, to a maximum of $6,500.
The homes that qualify for these tax credits include those with a purchase price of less than $800,000, including newly constructed homes, townhomes, single-family detached homes, resale homes and condos so long as these homes are going to be used as their main residence. Vacation homes and rental homes do not qualify for the tax credit. Explained further, a tax credit is refundable; meaning that if the amount of income tax you owe is lesser than the credit amount that you qualify for, the government will give you a check with the difference of the amount. For example, a first-time homebuyer who qualifies for the full $8,000 credit who owes $5,000 income tax will pay nothing to the IRS and will get a $3,000 payment from the federal government. If you will be receiving a $1,000 refund, you will receive $9,000 overall.
This tax credit is indeed a true credit because it does not have to be repaid unless the homeowner sells the home or ceases to use it as his or her primary residence within tree years after he or she makes the purchase. Most people have singed contracts to buy a home by September 30 before the tax credit expired. For a tax credit for first time homebuyers or those who own a home currently, if the purchase date is May or June 2010, you must prove that you entered into a contract to a home purchase before May. It is of vital importance to submit the documentation need for this. Those who are members of the intelligence community or the military have an extra year to purchase a home and qualify for this credit.
Filing and claiming for this tax credit will need documentation and must be submitted and filed through mail. However, many people used the Turbo Tax, TaxAct in calculating their taxes and completing the returns, printing the paperwork and submitting them. When homebuyers began claiming their first-time homebuyer tax credits together with an amended 2008 tax return, they started receiving the credit after six weeks of filing. As more and more people applied for the tax credit, it took longer to process, particularly if documentation is incomplete.

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