$9,800 in tax savings for first time buyers ends November 30, 2009
Calling all first time home buyers! Now is the time to buy a house to take advantage of $9,800!
The deadline for all the tax credits for first time home buyers is CLOSING on November 30, 2009 (meaning the actual closing must take place by No. 30). With this in mind, you need to look at having a house under contract by the first to middle part of October and plan on the closing by the first to middle part of November. The reason for the mid November closing is to give you a couple weeks in case something has to be pushed back a few days.
The tax credits equal $9,800**. There is the federal tax credit of UP TO $8,000 this year and UP TO $600 per year Georgia tax credit for 3 years. Below is some information on the tax credits:
**Some Income Restrictions may apply. Call Kelly for more information: 678-576-7075.
In February President Obama signed the American Recovery and Reinvestment Tax Act of 2009 which expanded and enhanced the first time homebuyer's credit enacted in 2008. Prior to the changes under the 2009 Act, a first-time homebuyer was eligible for a $7,500 "credit" for the purchase of a principal residence from April 9, 2008 to June 30, 2009. Although labeled a credit, it was a disguised interest free loan that had to be paid back to Uncle Sam in equal installments over 15 years and in some situations earlier, if the new owner stopped using the home as a principal residence or if the house was sold.
The enhanced credit applies to home purchases from January 1, 2009 through November 30, 2009. It has been increased to the lesser of $8,000 ($4,000 for a married taxpayer filing a joint return) or 10% of the of the home's purchase price. Repayment is not required provided the home is used as a principal residence for at least 36 months. Other good news is that the credit continues to be refundable. However, income phase-outs apply ($150,000 to $170,000 for married filing joint taxpayers, $75,000 to $95,000 for all other taxpayers) which makes the credit unavailable to "higher income" taxpayers.
Credit Eligibility
To be eligible, the purchaser must be a first-time homebuyer. A first-time homebuyer is an individual (and his or her spouse) who has not owned a principal residence during the three year period ending with the date of purchase of the qualifying residence. A qualifying residence may be a house, condominium, mobile home or houseboat.
In general, a purchase is nearly any acquisition by the taxpayer, although certain transactions are not considered, such as purchases between related persons, gifts and inheritances.
Georgia Single-Family Residence Tax Credit
House Bill 261 establishes an individual income tax credit for the purchase of a single family residence located in Georgia. To be eligible, the purchase must be made between June 1, 2009 and November 30, 2009. The property must be a single-family structure including a condominium that a single family occupies for residential purposes.
The single-family structure must have been for sale prior to and after May 11, 2009, or must be a residence that has been foreclosed by the mortgagor or mortgagor's agent or an owner- occupied residence for which the owner's acquisition indebtedness was in default prior to March 1, 2009.
The credit is the lesser of 1.2% of the purchase price or $1,800. Accordingly, the maximum credit is reached on a home purchase of $150,000 or more. The amount of credit claimed per year cannot exceed the lesser of 1/3 of the credit or the taxpayer's income tax liability, thereby limiting the credit to $600 per year. Any unused credit may be carried forward indefinitely and there is no carryback allowed. There is no requirement that the federal credit be allowed for the Georgia credit to apply.
Frequently asked questions:
Q: When must I pay back the credit for the home I purchased in 2009?
A: Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009. Obligation to repay the credit arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
Q: If I claim the first-time homebuyer credit for a purchase in 2009 and stop using the property as my principal residence before the 36 month period expires after I purchase, how is the credit repaid and how long do I have to repay it?
A: If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax for the year the home ceased to be your residence is due. The full amount of the credit is reflected as additional tax on that year’s tax return.
Q: I plan to build a home and occupy it in 2009. Can I claim the first-time homebuyer credit now and use the funds toward the down payment or other ongoing construction costs?
A: No. To qualify for the first time homebuyer credit, the residence must be purchased. By statute, a residence which is constructed by the taxpayer is treated as purchased on the date the taxpayer first occupies the residence.
Q: I bought my home in 2009 (early) and filed my 2008 tax return claiming the $7,500 first-time homebuyer credit that has to be repaid. Now the expanded law provides for an $8,000 credit that does not have to be repaid. What do I need to do to get the $8,000 credit that does not have to be paid back?
A: You can file an amended return.
Q: I am in the process of buying a home. I expect to close the deal before December 1, 2009. Can I claim the first-time homebuyer credit now? That would allow me to use the fund for a down payment.
A: No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchases occurs at the time of the closing, you do not qualify for the credit.
Over 43% of homes sold under $200,000 are Distressed Properties. Check back soon for the next article about why you want an agent who knows how to negotiate these kind of deals.