President Obama has signed into law the expansion of the program for granting tax credits to home buyers. Now it’s time for both current Baltimore homeowners and first-time buyers who are considering a home purchase to work with their Baltimore Realtor® on a plan for taking advantage of this financial opportunity.

To help you get started, here are the 12 things home buyers need to know about the tax credit:

• A first-time home buyer is defined as an individual or married couple who has had no owernship interest in a principal residence in the United States for three years before making the purchase for which they plan to claim the tax credit.
• Existing homeowners are those who have lived in their current home for at least five consecutive years over the previous eight years.
• For first-time buyers, the tax credit is equivalent to 10 percent of the purchase price of a home, up to a maximum of $8,000.
• Current homeowners are eligible for a tax credit of up to $6,500.
• The tax credit applies only to primary residences purchased for less than $800,000.
• For both first-time buyers and current owners, the annual income limits for receiving the full credit are a maximum of $125,000 for singles and $225,000 for married couples. Above those levels, the credit begins to phase out. To calculate the credit for buyers making more than those maximums, subtract the amount of the initial phaseout threshold from total earned income and divide the answer by by $20,000. Then multiply that ratio times the maximum amount of the credit. For instance, an individual who earned $135,000 would get a $4,000 first-time home buyer credit ($135,000 minus $125,000 = $10,000. $10,000 divided by $20,000 = 1/2. $8,000 times 1/2 = $4,000.)
• To claim a credit, both first-time buyers and current owners must have a signed sales contract before May 1, 2010, but they have until the end of June 2010 to actually close the transaction.
• For first-time buyers, the credit applies to purchases made on or after Jan. 1, 2009. For current owners, the purchase must have been made no sooner than Nov. 7, 2009.
• Buyers won’t have to pay back the credit if they use their new property as their primary residence for at least three years after the purchase.
• Buyers can claim the credit on their 2009 taxes, even if they buy their new home in 2010. They just have to file an amended return.
• To help prevent fraud, the legislation requires taxpayers to provide documentation — such as a copy of the buyer’s HUD-1 Settlement Statement — proving that they purchased a home. It also requires taxpayers to be at least 18 years old to claim the credit.
• Members of the military get a later deadline and will be allowed to sell their home without having to repay the credit if they are deployed to another location within three years of purchasing the home.

This may seem complicated at first, but it’s something we’re dealing with every day. If you have any questions, or want some help finding your way through this maze, give us a call, and we’ll be happy to help.

This entry was posted on Thursday, February 25th, 2010 at 6:12 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.