Top 10 things you should know about the homebuyer’s tax credit before it runs out

A tax credit of up to $8,000 is available to new homebuyers. Act now!

With April 15 quickly approaching, many of us find ourselves scrambling for the necessary information to ensure Uncle Sam gets his share—and our refunds are maximized. This past year, new legislation passed through the United States Congress to extend and expand the popular first-time homebuyer tax credit. The new and improved federal homebuyer tax credit can benefit not only first-time homebuyers, but also homeowners who choose to upgrade or buy a new home.

So, if you are thinking about taking advantage of this limited-time offer, or already have, here are the top 10 things you should know about the homebuyer’s tax credit before it runs out:

1. Who Can Get This Credit? – A tax credit of up to $8,000 is available for first-time home buyers purchasing on or after January 1, 2009 and on or before April 30, 2010. A tax credit of up to $6,500 is available for repeat home buyers who have owned a home for five consecutive years out of the prior eight years. The repeat home buyer tax credit applies to houses sold after November 6, 2009 and on or before April 30, 2010.

2. When Does it End? – The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract by April 30, 2010, and must close the transaction within 60 days after that date. Keep in mind, that deadline is much sooner than it may seem. Closing a transaction typically takes 45 to 60 days, plus the time it takes to find the right property.

3. What if I Purchase in 2010? – Purchase your home before April 30, 2010 and you can claim it on an amended 2009 income tax return. Purchase after April 30, and you will miss out on this opportunity.

4. Will I Have to Repay This? – Neither the first-time home buyer tax credit nor the repeat home buyer tax credit have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase. So, plan on staying in your home to keep your credit.

5. What is the Price Limit on the Credit? – All homes purchased below $800,000 are eligible for either the first-time home buyer tax credit or the repeat home buyer tax credit.

6. Do I Make Too Much to Qualify? – Income limits of $125,000 for individuals and $225,000 for married couples filing jointly apply to all sales occurring after November 6, 2009. Income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009 are $75,000 for individual taxpayers and $150,000 for married couples filing jointly.

7. Is This Tax Credit the Same as a Deduction? – No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. For example, a taxpayer who owes $8,000 in taxes and receives an $8,000 tax credit would owe nothing to the IRS.

8. Do All Types of Homes Qualify? – Any home purchased to be used as a principal residence will qualify for the credit. This includes single-family homes, townhouses, condominiums, mobile homes and houseboats.

9. What if I Need Help? – Homebuyers who want to take advantage of the tax credit should consult the right people for help. This may include a tax preparer, mortgage lender or real estate professional. This will ensure you get the most possible for your new home.

10. Don’t Procrastinate! – If you are thinking about buying a new home and taking advantage of this credit, get searching now. An early start will give you a better chance of finding the right property before the credit deadline. If you are a new homebuyer, remember to get pre-approved for a mortgage before you start your hunt. If you are selling, price your home aggressively to find a buyer.

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