First Time Home Buyers Tax Credit and Repeat Homebuyers Tax Credit
Tax Credit Myths and Truths
If you're looking to build a new home and take advantage of the extended tax credit, there might be less time than you think to make your decision.
The contract has to be signed by April 30. The home has to be completed and closed by July 1. That two month difference does not allow time for the process (finance, permits, construction) which can take up to six months.
Here are the facts you need to know, so you don't miss out on $8,000 for first time buyers; $6,500 for repeat homebuyers.
Tax Credit Truths and Myths
Myth: The tax credit is good until July 1st. Therefore, I can make a purchase up until that date.
Truth: Your home purchase can be CLOSED by July 1, but the actual CONTRACT MUST BE SIGNED BY APRIL 30th. The days in between are allocated for financing to be finalized and the transaction to be completed.
Myth: As long as I sign a contract by April 30th, I'll get the $8,000 first time homebuyers or $6,500 repeat homebuyers tax credit, even if my home isn't built yet.
Truth: The home has to be built by July 1, or you will not qualify. A home can be completed in 90 days or less with some builders, weather permitting. Factor in financing (see next myth), and permitting (see subsequent myth) and you'll want to make decisions by January 2010, to qualify. A new home contract signed on April 30th will result in a home being completed in September or October, three or four months beyond the tax credit deadline.
Myth: I can get financing for a new home within a couple of weeks.
Fact: Applications are taking from 30-60 days, or longer, in today's banking environment.
Myth: Permits are ready to go as soon as I choose a floor plan.
Truth: The permit process before things can get started usually takes three weeks - and can take longer for a home with special features such as handicap access or other homes built within special federal specifications.
Myth: I'm not a first time homebuyer, so I don't qualify for the credit.
Truth: If you've been renting for three years, you'll still qualify for the first time homebuyers tax credit. As long as you haven't owned a home for the past three years, according to the law you're still a "first time homebuyer".
Myth: I sold my home a year ago, so I don't qualify for the credit.
Truth: As long as you owned your previous home for five consecutive years out of the previous eight, you'll still qualify for the "repeat homebuyer" tax credit of $6500.
Myth: The new house must cost more than the old house.
Truth: Repeat homebuyers meeting eligibility requirements receive a tax credit of $6500, as long as the new home does not cost more than $800,000.
Myth: No home can be purchased for more than $800,000.
Truth: The $800,000 limit applies to repeat homebuyers. There is no limit to the price point for first time buyers.
Myth: Income does not matter.
Truth: For first-time buyers, the income limit eligibility is $75,000 for singles, $150,000 combined income for married. For repeat homebuyers, income limits are $125,000 for singles, $225,000 combined for married.
*Check with a tax professional. Stanton Homes does not offer tax advice, and recommends working with a tax professional for information on your specific situation.
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