The First-Time Homebuyer Credit: The Clock is Ticking

January 15th, 2010 • Related • Filed Under • by tisha

The last two years have been difficult years for the housing market. Job loss, high unemployment rates, the stock market downturn and the overall economic crisis painted a grim picture of the future of homeownership in the country. The Housing and Economic Recovery Act of 2008 was instituted to assist and incent people to purchase a home.

In November of 2009 the program was extended because so many Americans did not take advantage of the credit. Despite the economy looking better, there is still a national decline in the housing market. The first time homebuyer’s credit is an incentive to encourage potential homeowners to take advantage of the credits that are available. The deadline for the credit has been extended but the clock is ticking quickly.

Criteria to qualify for the first time homebuyer’s credit:

• You have to be a first time homebuyer of a principal residence. Your principal residence is considered the home where you live for the majority of the year.

• You cannot qualify if you are listed as a depended or claimed by anyone else during the year of your home purchase.

• You must be 18 or older to claim the credit.

• The contract to purchase must be signed on or before April 30th of 2010.

• The home must be closed on or before June 30th 2010.

• The credit does not apply for any home that exceeds $800,000.

• The home has to be your principal residence meaning a house, condo, trailer or houseboat. Vacation and rental properties do not qualify.

• The credit does not apply if you purchase your home from a close relative or a close relative of your spouse.

• The credit is given up to 10% of the purchase price of the home not to exceed $8,000.

How to claim your credit:

• You cannot claim the credit until you have formally closed on the home.

• Once you’ve closed on your home you are eligible to claim your credit on your income taxes. You must ensure that you have met the criteria for the program and done so within the timeframes outlined.

• You can claim your credit the year following your purchase. For example; if you close in February 2010 you can claim your credit when you file your 2010 taxes in 2011.

• You can claim the credit when you file your taxes for the following year. For example; if you purchased a home in November of 2009 and closed in December of 2009 you can claim it on your 2009 taxes.

• If you file your taxes early and then close in 2010 on a home you purchased in 2009 you can amend your taxes to show the credit on your 2009 tax returns.

The criteria for qualifying and the steps to claiming your first time homebuyer credit are simple and straightforward. As with any tax related information if you have questions you should consult the IRS website or your tax advisor.