How Do I Get the $8,000 New Homebuyer Tax Credit?
A major component of H.R. 3221, the Federal Housing Stimulus Bill, is an impressive $8,000 tax credit for homebuyers. Here are some important provisions, requirements, and consequences that you should know.
- Tax
credit available to "first time" homebuyers. It's
important to understand the definition of first time homebuyer. Part
of the definition is quite obvious. If you've never owned a home
before, you qualify. However, if you have not owned a home for at
least three years, you should also qualify for this new homebuyer
tax credit.
- Time frame to purchase
a home. Purchases that are completed between January 1 and December
1, 2009 qualify for this tax credit. The only important caution is
to be wary of waiting until mid-November to enter into a purchase
contract for a new home. You will probably not close (complete the
purchase) before December 1.
- Type
of property that qualifies. You must purchase the home as your
principal and primary owner occupied residence. That fabulous
waterfront vacation home you like - and at which you will spend a
few weeks per year - does not qualify as a
primary residence or this tax credit.
- Owe less than $8,000 in federal taxes? If you
have a tax liability of less than the credit, the federal government
will return the difference to you in a check. For example, after you
and your tax advisor complete your 2009 federal tax return, you find
that you have a total tax liability of $5,700. Your tax credit
($8,000) is $2,300 more than your tax bill. The government will send
you a check for $2,300!
- Can the tax credit be used for down payment assistance? Yes - and no. There was some confusion originally, some believing you could use the coming credit as a down payment offset or "money to come" guarantee by the federal government. That is the "no" portion of the answer. The "yes" component gives you some freedom to obtain some down payment funds knowing that you'll have your tax credit to reimburse yourself or others should you need down payment assistance.
Understand that this tax credit is not an incentive to purchase that must be repaid at any point in the future. It is a true tax credit. This is an important component of all real estate tips for new homebuyers as it may make the difference in your ability to afford a new home or complete a purchase successfully.
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Can the Federal New Homebuyer Tax Credit Help Me Sell My Home?
If you want to sell your home and ask, "How can the housing stimulus bill and homebuyer tax credit help me sell my house?" you're not alone. However, this wonderful tax credit can certainly help you sell your home in this down market. There are, at least, a couple of reasons why this buyer tax credit should help you as a seller.
- Stabilizes home valuations. Sellers often
feel a sense of helplessness when a down market causes them to lose
thousands of dollars of paper equity that they had prior to a real
estate devaluation. While this event can cause major problems when
homeowners want to refinance, decreased house FMVs (fair market
values) are even more damaging if you want to - or need to - sell
your home. Enter the new homebuyer tax credit like the cavalry to
the rescue. While not a "cure all," your home FMV
can become stabilized and many buyers that are attracted to your
home have a greater ability to purchase it. Put yourself in first
time homebuyer moccassins. You have limited funds, need down payment
assistance, cannot afford many area houses (even with depressed
prices), and still have a strong desire to become a homeowner. You
can now use this real time tax credit to put an additional $8,000
into your bank account. It may not help with that $2.3 Million ocean
front home you'd like, but it might really help you buy a home in a
good neighborhood. Instead of feeling pressure to discount your
selling price further, you may enjoy a better selling price and a
well qualified buyer.
- Motivates homebuyers who might otherwise wait. Remember, the key word in the housing stimulus bill is "stimulus." If you look at the history of economic downturns, you'll learn that both amateur and professional investors often sit on the "sidelines" and do nothing until the economy turns around. This tax credit should entice more homebuyers into the market with confidence and a positive attitude. Economics 101 states that when there are more products (homes) than buyers, the price goes down - always. Adding more motivated buyers to a market - any market - drives the price up for that product. More homebuyers - first time or not - improves the probability of selling your home faster and for a more acceptable price.
Homebuyer incentives and advantages always help sellers. This is an excellent example of this condition. First time homebuyers, formerly unsure, unmotivated, needing down payment assistance, and apprehensive of buying property in a down market will be more active in pursuing their dream - homeownership - knowing they will receive an $8,000 tax credit if they buy now. This condition helps sellers reach their goals, too.
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