If I Gave You $9,800 Would You Buy a House?

Posted @ Jul. 03 2009 11:02AM by Ray - home-garden

By Brett Duffy

If you are putting off buying a home, you could be leaving $9,800 on the table. Is that okay with you? The $8,000 federal tax credit is designed to get people who have not owned homes in the last three years to buy one now. As long as you qualify, you can potentially get your $8,000 as soon as two weeks after you close on your new property. It is important that you understand the qualifications, so you will want to sit down and discuss your personal situation with your professional team – realtor, mortgage advisor and certified public accountant (CPA).

Here are the basics as outlined in IRS form 5405:

Who Can Claim the Credit
In general, you can claim the credit if you are a first-time homebuyer. You are considered a first-time homebuyer if:
1. You purchased your main home located in the United States after April 8, 2008, and before December 1, 2009.
2. You (and your spouse if married) did not own any other main home during the three-year period ending on the date of purchase.

Credit Amount
Generally, the credit is the smaller of:
1. $8,000, but only half of that amount if married filing separately, or
2. 10% of the purchase price of the home.

You are allowed the full amount of the credit if your modified adjusted gross income (MAGI) is $75,000 or less ($150,000 or less if married filing jointly). The phase-out of the credit begins when your MAGI exceeds $75,000 ($150,000 if married filing jointly). The credit is eliminated completely when your MAGI reaches $95,000 ($170,000 if married filing jointly).

Since most people have already filed their 2008 taxes, you may be wondering how soon you can get your money. Right now, we are seeing people who file an amendment to their 2008 taxes once they have purchased their property get their checks on average in less than a month. You should consult your personal CPA, but you should make sure you have a copy of your HUD from your closing to send in with your amendment to your 2008 return. This credit can actually put $8,000 in your pocket.

Now this has obviously been around for a while, but the added state incentive is even more attractive now. It’s a little different from the federal credit since it is actually spread over three years of state returns and has a maximum of $1,800. So how do you get this one? To qualify, you must purchase either a new single family residence, previously occupied residence that was for sale prior to the May 11, 2009 and is still for sale after May 11, 2009, owner-occupied residence in which the owner's acquisition debt is in default on or before March 1, 2009, or a foreclosed residence that is owned by the mortgagor or the mortgagor's agent.

The result of this purchase and the properly filed forms will be a credit to your Georgia Income Taxes equal to 1.2% of the purchase price up to $1,800 spread over three years. This can only be used to reduce your tax liability and will not result in cash in your pocket if it exceeds your liability. Let’s say it keeps more money in your pocket versus putting money in your pocket. You also have to wait three years to see the full reward.

So now you may be thinking this really is a great time to buy something. Let me sweeten the pot a little by adding the crazy low interest rates that are available right now. As a general rule of thumb, every point your interest rate goes up, your buying power goes down 9%! So, when interest rates climb back up to the more normal 6-7% range, you will only be able to afford about 80% of the property you could buy today. Can you see now why it is so important for you to be paying attention and speaking with the right professionals so that you don’t miss out on this great opportunity?

Speaking of opportunities, those of you in homes who are thinking about buying something larger might just be ready to get serious about making that happen sooner than later. There’s plenty of great inventory out there so contact your realtor today!

If you would like information specific to your situation or just want to talk real estate, please feel free to come by the office, call, or send me an email at Brett.Duffy@ColdwellBankerAtlanta.com.