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Tax Credit Is Good News for Prospective Home Buyers

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By Jayne Boykin

RISMEDIA, June 3, 2009-(MCT)-The popularity of reality-based TV shows focusing on the experiences of first-time home buyers paints a rosy picture, but the recent national news of mortgage foreclosures has darkened that picture a bit.

Not to worry, said Carole Buckholts, a broker/associate with Kay’s Real Estate in Duncan. There is good news for people who are in the market for their first home.

“Under the new administration’s stimulus plan, ‘first-time home buyers’ are eligible to receive an $8,000 tax credit. The tax credit is equal to 10% of the home’s purchase price, up to a maximum of $8,000,” she said. “For example, if the purchase price of a home is $60,000, then the buyer would be eligible for a $6,000 tax credit.”

For purposes of the tax credit, a first-time home buyer is defined as “someone who has not owned a principal residence during the last three years prior to purchase,” Buckholts explained.

That opens the program not just to young people who are looking for a first home, but also to those who have owned homes in the past but have sold them, perhaps because of death or divorce in the family, she said. Many of those people do not realize that they can qualify as first-time buyers, even though it’s not the first home they’ve purchased in their lives.

The tax credit is available for homes closed on or after Jan. 1 of this year, and on or before Nov. 30, 2009.

The purchaser would file IRS form 5405 with his or her form 1040 tax return, attesting to the purchase.

“I would recommend that they consult their tax professional for those details,” Buckholts said. “There is even a way that people who are planning to purchase a home can change their deductions on their W-4 withholding form with their employer, and have less tax held out during the year, which can then be saved and used for a down payment or closing costs when they buy their home. Again, it’s a bit complicated, so before people make any drastic changes in their tax withholding, they should definitely check with their tax person.”

If the property is held for a minimum of three years, the tax credit does not have to be repaid. This provision differs from the $7,500 tax credit available in 2008 in that the 2008 tax credit had to be repaid in 15 years, she noted. The purchaser can elect to take the new tax credit in 2008 or 2009, though taking it in 2009 would probably be a better option because it would not have to be paid back.

“Also, it should be noted that there are income limitations where the tax credit begins to phase out for people who have an adjusted gross income over $75,000 individually, or $150,000 if filing jointly,” Buckholts said. “Say you are an individual with an adjusted gross income of $85,000. You would get half of the tax credit. If you hit $95,000, then you would no longer be eligible. You can go to IRS.gov for more information.

“This is a unique opportunity for certain individuals to realize the American Dream of homeownership and help our housing market recover in the process,” she said. “There are a lot of homes available now in a good variety of price ranges. There’s not as much activity in home sales as there was in 2007, but a lot of folks are buying and selling these days.

“It’s definitely a buyers’ market.”

Copyright © 2009, The Duncan Banner, Okla.
Distributed by McClatchy-Tribune Information Services.

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