203k Program Helps First-Time Buyers Turn Dreams into Reality

HUD´s 203k program is specifically designed to rehabilitate and repair single-family homes. The 203k is a single mortgage loan that provides funds to purchase a home and make repairs and improvements.  For more information, visit www.hud.gov or www.re-buildusa.com.

Federal Homeowner Tax Credit Deadline is April 30, 2010

In November 2009, the Federal Homeowner Tax Credit was expanded and extended.  The tax credit was expanded to include both first time buyers and long-time residents.
The income limits were expanded to $125,000 for a single person and $225,000 for a couple.  The tax credit was extended to April 30, 2010 to have a home under contract with a closing by June 30, 2010.

The Key Program Highlights:
	First-Time Homebuyer	Repeat/Move-Up Homebuyer
Amount of Tax Credit	Up to $8,000 (10% of the purchase price, up to a maximum of $8,000)	Up to $6,500 (10% of the purchase price, up to a maximum of $6,500)
Eligibility	Qualifying homebuyers have not owned a principal residence in the last three years.	Qualifying homebuyers have used the home sold or being sold as their primary residence consecutively for 5 years of the previous 8 years.
Income Limits	$125,000 for single taxpayers; $225,000 for joint taxpayers
Purchase Price Limits	$800,000 maximum for both first-time and repeat/move-up buyers.
No Repayment Required	The tax credit does not have to be repaid, but homebuyers must maintain the new home as their principal residence for at least three years or face recapture of the tax credit amount.
Military Personnel	Military personnel deployed overseas for a minimum of 90 days in 2008 or 2009 would have until April 30, 2011 to claim the tax credit.
Limited Time Only	Qualifying homebuyers must have a signed purchase contract in effect by April 30, 2010 and close the transaction on or before June 30, 2010

The tax credit is $8,000 for first-time buyers and $6,500 for long-time residents.  A first time buyer is defined as someone who has not owned a home during the last three years.  A long-time resident is defined as someone who has owned a home at least five out of the last eight years.  The seller of the property can be anyone except a direct relative.  The buyer cannot be claimed as a dependant on someone else's tax return.

The maximum pruchase price of a property is $800,000.  The program is designed for primary residences as opposed to investment property.  The purchaser should plan on owning the property for at least three years.  If the property is sold within three years, the tax credit must be returned.

A tax credit differs from a tax deduction.  A qualifying purchaser under this program will have a credit toward their income taxes owed.  If the income taxes owed are less than the credit, the qualifying purchaser will receive a tax refund.  A qualifying purchaser simply needs to include IRS Form 5405 and the settlement statement with their tax return.

Of course, a prospective buyer should seek the advice of a CPA to discuss the particulars of their own situation.

April 30 is quickly approaching.  Interest rates are low and there is a good supply of homes for sale.  If you, or someone you know, wants to take advantage of this unique opportunity, now is the time to get started.

WHO QUALIFIES FOR THE EXTENDED CREDIT?
*First time home buyers who purchase homes Between November 7, 2009 and April 30, 2010.  To qualify as a "first time home buyer" the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
*Current home owners purchasing a home between November 7, 2009, and April 30, 2010, who have used the home being sold or vacated as a principal residence for five CONSECUTIVE years within the last eight.

WHICH PROPERTIES ARE ELIGIBLE?
The Extended Home Buyer Tax Credit may be applied to primary residences including single-family homes, condos, townhomes, and co-ops.

HOW MUCH IS AVAILABLE?
The maximum allowable credit for first time home buyers is $8,000. 
The maximum allowable credit for current homeowners is $6,500.

HOW IS A BUYER'S CREDIT AMOUNT DETERMINED?
Each home buyer's tax credit is determined by two additional factors:
1. The price of the home.  Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.
2. The buyer's income.  Single buyers with incomes up to $125,000 and married couples with incomes up to $225,000 may receive the maximum tax credit.

IF THE BUYER/S' INCOME EXCEEDS THESE LIMITS CAN THEY STILL GET A CREDIT?
Yes, some buyers may still be eligible for the credit.  The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly.  The amount of the tax credit decreases as their income approaches the maximum limit.  Home buyers earning more than the maximum qualifying income-over $145,000 for singles and over $245,000 for couples-are not eligible for the credit.

CAN A BUYER STILL QUALIFY IF THEY CLOSE AFTER APRIL 30, 2010?
As long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010, to close.

WILL THE TAX CREDIT NEED TO BE REPAID?
No. The buyer does not need to repay the tax credit if they occupy the home for three years or more.  However, if the property is sold during this three year period, the full amount credit will be recouped on the sale.


          January 25, 2010: IRS Releases new forms and instructions   


The IRS has released IR-2010-006 providing a revised Form 5405 to reflect the changes to the tax credit made in the extension and expansion legislation enacted in November 2009.  The release reminds taxpayers that all tax returns claiming the tax credit must be filed manually (i.e. they cannot utilize the IRS E-File automatic system).  The revised form includes a section for those repeat buyers who are eligible to claim the $6500 tax credit.  The HUD-1 or evidence of the transaction must be filed with all returns claiming the credit (both the $8000 and $6500 credits). Individuals who claim the repeat buyer credit must also provide evidence that they have owned and used the prior residence for 5 consecutive years.  The instructions indicate that property tax or homeowners insurance records are sufficient for this purpose.  See more on the IRS website.

                  
                        Facts on the Energy-Efficiency Tax Credit