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For
2009, Congress passed the American Recovery
and Reinvestment Act, which provided for an
$8,000 refundable tax credit for first-time
home buyers. Here’s a quick glance at the tax
credit:
What
is the amount of the tax?
The
tax is calculated as 10% of the purchase price
of the home, with the maximum benefit being
$8,000 ($80,000 x 10% = $8,000). It’s safe to
say, virtually every condo purchase in the greater
Seattle area will be eligible for the tax credit.
Is
there a time period to purchase a house or condo?
Yes. The property must be purchased, that is
closed, between January 1, 2009 and November
30, 2009.
Who
qualifies as a first-time home/condo buyer?
Anyone who has not held an ownership interest
in real property as a principal residence for
the past three years from the date of purchase.
What
properties qualify?
Any condo, townhome or single family home that
is a principal residence. A principal residence
is where an individual spends the majority of
their time (50% or more). Additionally, properties
may not have been purchased from a spouse or
relative.
Does
the credit need to be paid back?
No. However, if the property is sold within
36 months of purchase the credit will be recaptured.
This is to prevent flipping.
Are
there income limits?
Yes. The income limit for individuals is $75,000
and for married couples it’s $150,000. However,
a partial credit is available to individuals
earning up to $95,000 and couples earning up
to $175,000.
How
do I claim the tax credit?
You simply complete IRS Form 5405 with your
tax return filing.
For
more in-depth information, please Contact
Us and we'll be happy to answer your questions
or download our First
Time Home Buyers Tax Credit packet (PDF).
UPDATE:
The
Washington State legislature recently approved
a measure that will provide first-time home
buyers the ability to access the credit at the
time of purchase rather than waiting until they
file their tax return. This will allow buyers
to use the $8,000 towards a down payment or
closing costs. In essence, buyers will be able
to obtain an $8,000 loan at the time of purchase
that would be paid back after filing their tax
return and receiving the credit from the federal
government.
UPDATE
(June 1, 2009):
The Washington State measure has been signed
into law, thereby, clearing the way to "monetize"
the credit at closing. Unfortunately, it has
run into an issue with the IRS. The state measure
would have the tax credit paid directly to the
bridge loan provider, which is against IRS rules.
HUD
also recently approved monetizing the tax credit
for FHA-insured mortgages. However, this is
a little tricky. For FHA mortgages originated
through government agencies (e.g. Washington
State Housing Finance Commission) or non-profits,
the tax credit can be applied directly to the
3.5% FHA down payment requirement. For loans
originated through other FHA-approved lenders
(e.g. banks, mortgage brokers), the tax credit
can only be applied to down payment over and
above the initial 3.5% amount or towards closing
costs.
Additonal
resources:
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