All Things Financial Planning Blog

Are you or someone you know planning on buying a new home?  Well, now is the time to act!  If you wait much longer, you might miss out on some free cash from the government.  Approved in February 2009, as part of the federal government’s American Recovery and Reinvestment Act, the first-time homebuyer tax credit is available to qualified first-time homebuyers who close on their home before December 1, 2009. 

The credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.  This is a dollar for dollar credit and is refundable, meaning that even if you do not owe any tax you will receive a refund check for the amount you qualify for.  For example, if you buy a house that costs $80,000 or more you could erase $8,000 of tax liability come April 2010.

Below are some of the eligibility requirements:

• A first-time homebuyer is defined as someone who has not owned a home within the last three years.  In the case of a married couple, neither spouse can have owned a home within the last three years or both are disqualified.
• Income requirements are based on your Modified Adjusted Gross Income (MAGI).  The income limit is $75,000 for single tax payers and $150,000 for married tax payers filing a joint return.  The phase out range is $20,000, so qualified single buyers can qualify for part of the credit up to a MAGI of $95,000 and married filing joint up to $170,000.  For example, if you are single and your MAGI is $85,000, your credit would be $4,000.
• All types of homes qualify, including single-family, townhomes and condominiums.
• You must maintain the home as your primary residence for three years or you will have to pay all or a portion of the credit back.
• You must close and take ownership of your home before December 1, 2009.

If you meet the eligibility requirements for the tax credit buying a house offers more tax benefits than ever before. Also, with interest rates at historic lows and an overload of homes on the market this is a great time to consider buying a home.

Tara Scottino
Senior Vice President
Carter Advisory Services
Dallas, TX