Taxes

Tax Credit Helps Homebuyers

Posted: 5/3/2010

Some homeowners may have a less taxing time of it this year.

(NAPSI)-It may sound surprising to some, but there may never be a better time to buy a home.

As if the convergence of low mortgage rates and recession-slashed home prices weren't enough, Congress recently extended and expanded a tax credit for homebuyers until April 30, 2010. The revised legislation retains an $8,000 credit for first-time buyers and adds a $6,500 credit for many move-up buyers.

"One of the biggest hurdles for people who dream of buying a home is the down payment and closing costs, and right now the government is essentially offering to help pick up that tab," says Margaret Kelly, CEO of RE/MAX International, a U.S.-based network of nearly 100,000 real estate agents.

Kelly explains that the tax credit is motivating buyers to find the resources to make those up-front payments, knowing they could see some or all of the money come back to them in the form of a tax refund.

Who Qualifies?

Originally approved for first-time homebuyers who haven't owned a principal residence in three years, the Homebuyer Tax Credit guidelines now include opportunities for anyone who has owned and lived in a home for at least five consecutive years out of the past eight.

The homes purchased cannot exceed $800,000. Buyers are given a credit of 10 percent of the purchase price, up to the limits of the credit. There's no repayment requirement as long as you live in the new home for three years.

The $6,500 tax credit can be claimed by buyers who, among other scenarios:

• Have continuously lived in a home that they purchased at least five years ago;
  
  
• No longer live in a home they still own, but lived in it continuously for five years of the past eight; or
  
  
• Sold a home up to three years ago after living in it continuously for five years.

People who sold a home more than three years ago are considered first-timer buyers and can still qualify for the $8,000 credit.

Individuals who earn up to $125,000, and couples who earn up to $225,000, are eligible for the full credit. Individuals who earn between $125,000 and $145,000--and couples who earn between $225,000 and $245,000--can get a percentage of the full credit.

Window of Opportunity

Qualified buyers must enter a purchase contract by April 30 and close by June 30. Buyers can either amend their 2009 tax return to claim the credit immediately or wait to claim it on their 2010 tax returns. In both cases, buyers will reduce their taxes owed or increase their refund by either the full tax credit amount or 10 percent of the purchase price, whichever is less.

With so many potential buyers meeting the new guidelines, anyone who's interested in buying may want to consult a real estate professional soon about their options, says Kelly.

"There's a big potential for competition with other people looking to buy in the same time frame, so buyers really shouldn't wait to get the process started," she explains. "Realtors are on the front lines and they can help people understand the tax credit, qualify for a mortgage and get the keys to their new home before the deadline."

Economists with the National Association of Realtors estimate that the tax credit has contributed more than $22 billion to the economy, and project that 2 million people will take advantage of it this year.

Learn More

To learn more about the U.S. Homebuyer Tax Credit, call 1-800-525-7452 or visit the Learning Center at www.remax.com. There, you can also use the "Find an Agent" feature to locate a real estate agent.

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