The deadline for the extended and expanded homebuyer/homeowner tax credit is just around the corner. It’s important for HAR members to remind their clients that they only have until April 30 to take advantage of this important incentive.

Although the tax credit has been available for some time already, both members and consumers still have many questions about the terms, so here is some information we think you’ll find helpful.

First Time Homebuyers Credit
To qualify as a “first time homebuyer,” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase and this must be a primary residence. First-time homebuyers can qualify to receive a maximum benefit of up to $8,000. Additionally, purchasers must be at least 18 years of age on the date of the purchase.  This tax credit cannot exceed 10 percent of the purchase price of a home, which means that any home above $80,000 qualifies the buyer for the full amount of the credit. The purchase price cannot exceed $800,000.

This is a true credit, meaning if you have a $3,000 tax burden and qualify for the full amount allowed under the program, you’ll actually get $5,000 back.

However, in order to take advantage of this incentive, a signed contract must be in place by April 30, 2010. The actual closing date can be as late as June 30. New construction homes qualify for this credit so long as the dates are met.

Also, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000 may receive the maximum tax credit. The credit decreases for single buyers who earn between $125,000 and $145,000; the credit similarly decreases for home buyers who file jointly and earn between $225,000 and $245,000. The amount of the tax credit decreases as his/her income approaches the maximum limit. Homebuyers earning more than the maximum qualifying income--over $145,000 for singles and over $245,000 for couples—are not eligible for the credit.

Existing Homebuyers Tax Credit
Eligible current homeowners may claim up to a $6,500 credit for qualifying properties.

To take advantage of the credit, homeowners must meet certain criteria, which can be a little confusing. Let me provide some clarification:

If you have owned and lived in a home for at least five consecutive years of the last eight years and meet income requirements, you likely qualify for the credit.

Here’s something interesting: You don’t have to sell your existing home to take advantage of the credit. The home you purchase must become your principal residence though, so you would have to move there. But you may be in a position to keep your original house as a second home or rental property.

Paybacks
As long as you live in the newly purchased home for three years before selling it, the credit does not have to be repaid.  However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.   A notable exception is members of our military, who do not have to repay the credit if they must sell the home or stop using it as a residence because of extended duty.

In addition, service personnel outside of the U.S. during any part of 2009 or early 2010 get an additional year to claim the credit. In other words, in most cases, the program ends this April 30, but active-duty service members working overseas have until April 30, 2011 to have a signed contract.

Get your ducks in a row
If you’re ready to buy your first house, or have been considering a move-up, the time is right. You have a little time, but talk to a Realtor soon. April 30 will be here before you know it.

You can find all the details about the tax credit on the National Association of REALTORS® Web site –
www.realtor.org. If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at 1-800-829-1040.

Source: HoustonREALTORS®Online