12 Things to Know About the Homebuyer Tax Credit

Posted by Lakes Area Realty on Tuesday, April 6th, 2010 at 12:17pm.

 The deadline is fast approaching. If you're in the market for a new home and are hoping to take advantage of the tax credit, here's what you need to know:


1. To qualify, first-time and repeat buyers must enter into a written binding contract by April 30, 2010 and close by June 30, 2010.


2. You qualify as a first-time homebuyer if you (and your spouse, if married) have not owned a primary residence for a 3-year period before your purchase, and you have never taken advantage of the DC first-time homebuyer credit.


3. Buyers qualify for the repeat buyer credit if they have lived in their primary residence for five consecutive years of the past eight years. A primary residence is generally regarded as the residence where an individual spends most of his or her time.


4. The credit may be applied to primary residences, including detached single-family homes, condos, townhouses, and co-ops.


5. The maximum allowable credit for first-time buyers is $8,000. The maximum allowable credit for repeat buyers (also known as long-term residents) is $6,500...


6. The tax credit is equal to 10% of the purchase price of your home, up to $8,000 for first-time buyers and up to $6,500 for most other buyers.


7. Like all tax credits, it will directly reduce the total amount of taxes you owe.


8. The full credit is available for single individuals whose adjusted gross income is less than $125,000. If your adjusted gross income is greater than $125,000 and your home purchase qualifies you for the full credit, the credit phases out by set percentages according to the adjusted gross income above the $125,000. The adjusted gross income for married couples filing jointly is $225,000, with the credit beginning to phase out for amounts higher than the $225,000.


9. The purchase price of the home cannot exceed $800,000.


10. There is a mild recapture provision with the program. If you sell your home within three years of purchase, the entire amount of the credit is recaptured (that is, the government takes it back).


11. Dependents are not eligible for the credit.


12. Purchase documentation must be included with the tax return in order to claim the credit.


Please contact us if we can assist you with the sale or purchase of a home.


For more information about the tax implications of the credit and your home purchase, please consult a tax professional.

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