Make the Most of your Home Buying Tax Credit
Are you a first time home buyer? You will definitely want to make sure
that you take the most advantage possible from the home buying tax credit programs
available for first time homebuyers.
If you are not familiar with the tax credit for first time home buyers
you should know that this program can be claimed either on 2009 or on 2010 tax
returns. If you obtain a loan that is backed by the Federal Housing
Administration, you can use funds to cover closing costs as well as
other fees including the down payment in certain cases. Also, there are several states which provide methods for
home buyers to use the tax credit in even faster ways.
In order to be eligible for the tax credit, you must not have owned a home within
the preceding three years and you must buy the house, or enter into a
binding contract to buy, on or before April 30, 2010. Home buyers who
purchases a home from Apr 8, 2008 to June 30, 2010 may be able to take
advantage of the first-time homebuyer credit. There are some tips that you should keep in mind.
First, remember that there are applicable income thresholds. In order to
qualify for the tax credit, individuals must have an income of not more
than $75,000 and joint filers must have an income that does not exceed
$150,000. The credit does begin to phase out once those limits have been
exceeded.
If you did not claim the tax credit on last year's taxes and you claim
it on your 2010 taxes then there is the possibility of actually
increasing your take home pay. This is because you will be able to
change your withholding status and receive more money on your paycheck.
While you will not be able to receive as large of a tax refund next
year, you will have a little extra income every month now.
In addition, you can reduce your federal as well as your
state tax withholding in order to account for the tax deduction that you
will be taking on the property taxes and mortgage interest that you will
be paying.
There are now at least ten states in which bridge loans are being
offered for the federal tax credit. Such loans allow homeowners to
benefit from the $8,000 tax credit prior to the 2010 filing season. At
the current time, in order to qualify, you must be a homebuyer in the
following states: Colorado, Delaware, Idaho, Kentucky, Missouri, New
Jersey, New Mexico, Ohio, Pennsylvania and Tennessee. In these states,
homebuyers have the ability to receive a loan with no or little interest
and then repay the loan using their tax credit refund from the next
year. This certainly provides many homeowners with more flexibility than
they previously had. Keep in mind that the home buying tax credit programs do vary according to
state. Some programs require a minimum down payment be made by the home buyer.
Apart from that, there are some non-profit organizations that are
offering bridge loans for the tax credits as well, including NeighborWorks America. Furthermore, the state of California has also
recently come up with its own one-time home buying credit. This program
applies to homes that are newly built and are purchased between February
28th 2009 and March 1, 2010. This is a nonrefundable credit which is
available to all home buyers, not just first time home buyers. The
credit is the equivalent of 5% of the purchase price up to a maximum
amount of $10,000. The credit may be claimed over a three year period.
Qualified properties must be single-family residence properties and must also
be the principal residence of the buyer.
Residents in California may take both the federal as well as the state
tax. Residents should understand that funding is limited and at the
current time there are no plans to provide more funding for the program,
so it is definitely on a first come, first serve basis.
Recently it was also announced by FHA that borrowers will be able to
receive advances on the $8,000 tax credit through lenders. This means
that borrowers will not have to wait until next year to receive the
credit through the IRS. Of course, buyers will still need to provide the
3.5% down payment that is required by FHA, but the advance from the
credit can be applied increase the down payment or may be applied to
closing costs or other fees. Keep in mind that lenders are not
necessarily required to participate in the program due to the fact that
it does involve more work for them. For more information on First time
homebuyer tax credit, please refer to
IRS for more details.
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