Many people ask if this is the perfect time to purchase their very first home. Although the real estate market is slowing and the properties are devaluating, there are several reasons why you should purchase your homes now. One, prices are incredibly low. If you can afford getting a mortgage and you have no problems with credits, home buying can be extremely affordable. Second, you will be helping the government in improving the near to being capsized economy the country has. Your purchase will add up to the overall consumer spending; thus, increasing revenues for the real estate industry (which is one of the major component of the GDP for the country) and increase in employment opportunities for the people.
However, the best reason why you should purchase your first home right now is because of the stimulus plan the President Obama approved. This was made to improve the stagnating real estate market but also to assist first-time homebuyers in making an affordable purchase. Do you want to know more about it? Read the following sections.
Tax Benefits for the first-time homebuyers
Part of the stimulus plan was giving an $8,000 or 10% of the purchase price tax credit for the first-time homebuyers. It could also be $4,000 for each couple filing separately. Qualified applicants can file for its application using the IRS form 5405.
These amounts can also be applied as a refund credit. This means the IRS can write back a check to the taxpayer if their federal taxes owed are lesser than the credited amount. For example, you owed around $2,000 FT for the year 2009. If you qualified for an $8,000 tax credit, you can pocket the remaining $6,000 after cashing out the check sent by the IRS.
The tax credit is not payable unless the property purchased ceases to be the primary residence within 3 years from the date of purchase. By then, the tax credited shall become tax payable within the same year the home was converted for rental or for sale.
Defining qualified first-time homebuyers
To know whether you are qualified as a first-time homebuyer, check out the conditions below:
1. You should have not purchased your main home 3 years prior to the qualified date of purchase.
2. Purchase dates should fall on January 1, 2009 or before December 1, 2009.
3. Purchase properties made are single-family detached homes, attached homes like apartments, condominiums or town homes, motor homes like trailers and boat homes, and cooperative apartments. All of them shall be treated as a primary home, which means this is where you live most of the time (taken from the IRS definition).
4. Modified Adjusted Gross Income (MAGI) for single taxpayers shall be $75,000 but not equivalent to or exceeding $95,000. For married couples, it should be $150,000 but not equivalent to or exceeding $170,000.
5. Properties purchased should be within United States and should not be acquired through donation or any acts equivalent to this, inheritance or as a gift.
Take note: As mentioned above, the MAGI have limits. The phase-out is initiated as the amount exceeds the $75,000 and $150,000 mark. Tax credit is then forfeited upon reaching the maximum values.
Differences with 2008 Tax Benefit
Prior to application of this 2009 tax benefit, the original amount was only $7,500. This was the tax credit for 2008 first-time homebuyers and was part of the Housing Recovery Act of 2008. The tax credit was treated as an interest-free loan, since it will be repaid in the year 2010. The repayment provisions are a 15-year period and should be done in 15 equal installments. This was applicable for home purchased in April 9, 2008 and before January 1, 2009.
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