SGI Realty One Real Estate Blog

Good news for First Time home buyers in 2010. The Economic Stimulus Package of Obama had offered a great incentive to qualified First Time Home Buyers by way of a refundable tax credit of $8000. This incentive has been extended to 2010 for all U.S. Citizens and in certain cases even in 2011! All qualified home purchases made on or before April 30, 2010 are eligible for $8k housing stimulus. In order to qualify you only need to sign a binding contract by April 30 2010, and you may complete your home purchase by June 30, 2010. Moreover, certain government employees - Military, Foreign service and intelligence community have one more additional year, that is until April 30 2011 to take advantage of Home buyer tax credit.

In order to understand the 8k housing tax credit details you need to understand the following seven important points.

1. What is the definition of First time home buyer? -The law defines as a home buyer who has not owned a principal residence for the last three years. For married tax payers, you and your spouse must be 'first time home buyers' in order to qualify for the housing tax credit. For unmarried joint purchases, either of the qualifying partner may be a 'first time home buyer'. In this case the $8k housing tax credit can be allocated to any of the partners. Both rental property and vacation homes do not count as principal residence. If the new home you are purchasing is a mobile home or condo, and it is going to be your principal residence, you still qualify for the home buyer tax credit. Even building a home on a land qualifies for the $8k housing tax credit. Even non resident aliens who are not US citizens may qualify for this tax credit.

2. Dates of home purchase and deadlines - In order to qualify for the home buyer tax credit, the first time home buyer must purchase the house after January 1 2009 and on or before April 30, 2010. However, here is one thing you should remember about the deadline for the housing tax credit - it is enough to enter a binding contract on or before April 30 2010, you then have June 30, 2010 to complete the purchase.

3. How much tax credit will home buyers get? - Although this tax credit is referred to as $8k housing tax credit, remember that the total amount of tax credit a home buyer gets is equal to 10% of the purchase price of the new house up to maximum of $8k. Thus in order to get a full tax credit of $8k your purchased property must be above $80k in value.

4. Income Limits for $8k home buyer tax credit: First time home buyers with modified gross annual income of $75k get full benefit of this housing tax credit. The tax credit is gradually reduced for those with income between $75kto $95k and finally a home buyer gets no tax credit if his/her modified gross annual income is more than $95k. For married taxpayers, the home buyer tax credit is gradually reduced to zero for modified gross annual income between $150kto $170k.

5. This is a Refundable Tax Credit - This $8k housing tax credit is a tax credit and not a tax deduction. That is qualified first time home buyers deduct $8000 from their total tax owed to the IRS and NOT the total taxable income.

· Homes costing over $800k are not eligible for $8k first time home buyer tax credit.

· The tax credit cannot be claimed if the property or purchased house was received as a gift or inheritance or if it was acquired from a relative.

· You have to continue residing in the new home for three consecutive years after you purchase it.

· A person below 18 years or a dependent is not eligible for the credit.