The home buying market has been affected deeply by the economy. People are really afraid to get out there and invest in a home when they are unsure of their own future. They don’t want to invest money that they may need later on. They also don’t want to get involved with a long term mortgage and then not be able to make the monthly payments later on.
All of those thoughts can put the brakes on someone buying a home. That is why there is a generous tax credit offered for first time homebuyers. The amount of the credit is $8,000 which is higher than it has ever been before. The purpose behind it is to get those that are sitting on the fence to move forward and to invest in a home. Then the overall economy can be stimulated by it.
This tax credit was implemented in January of 2009 and will continue through April of 2010. There are income limits that apply for the household involved too. For a single parent household the annual income can’t exceed $125,000. For a two parent household the annual income can’t be more than $225,000.
However, this doesn’t mean you can’t qualify if your adjusted gross income is higher than that. What will occur in such a circumstance is that the amount of the tax credit would be reduced by the percentage that the household is over income. There are mathematical equations in place to determine what that percentage would be.
Many people are actually eligible for this credit but they don’t know that. This is because the terminology of it isn’t clear. For example the term “first time homebuyer” implies you have never purchased a home before right? Yet the requirements for this tax credit says that you can’t have purchased one within the last three years.
The other issue that most people don’t know is that the tax credit is up to a maximum of $8,000. It doesn’t mean that you will get that total amount. The credit is based upon the purchase price of the home. The maximum is 10 of the purchase price or the $8,000. For example if you buy a home worth $50,000 then the maximum would be $5,000. However, if you buy a home that is valued at $200,000 the maximum would be $8,000 and not 10 which would be $20,000.
There is a simple form called a 5045 that is very simple to fill out. You can do it if you complete your tax return on your own. It is also something that you can have your tax preparer do for you. The calculation form a specific line offers will then be placed onto a line on your 1040 format of your tax return.
Make sure you talk with your real estate agent and your lender about the first time homebuyer tax credit. You want to make sure you meet all of the requirements for it. In addition to this first time buyer credit, there is one offered for up to $6,500 when you buy another home. The biggest stipulation with that credit though is you must have lived in your current home for at least the past four years.
If you do want to buy your own home and have been thinking about it, this type of credit can really help you to make up your mind. There isn’t too much time left though to take advantage of it. If you think you do qualify find out and then get busy looking for a home.
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