Early in the year Congress enacted an $8,000 tax credit for first time homebuyers purchasing a house between January 1st and November 30th of this year. As you can tell, that November deadline is just around the corner. In order to qualify, your house must close escrow on or before that date. The IRS even states, “you may not claim the credit in anticipation of a purchase that has yet to happen.”
Beating the Deadline
If you plan to take advantage of the credit but have not already begun the process of buying a home, you are probably too late. Even after you have an accepted offer, and approval on a loan, it can take 30 to 60 days to close escrow. Additionally, title and escrow companies are being swamped with purchases that need to be completed before December 1st, which will likely cause delays if you are trying to close escrow at the last minute.
On the other hand, if you have already begun the process then there are a few things you can do to make sure you beat the deadline. Depending on what stage in the game you are at, you want to make sure that you have all of your ducks in a row. Tell your real estate agent, loan officer, and title company that you are in a hurry and push for as short of a close of escrow as possible.
Qualifying as a "First-Time" Homebuyer
There has been a lot of confusion over the phrase "first-time" homebuyer, as you can actually qualify for the credit if you have bought a home in the past. As long as you have not owned your principal residence within the last three years, then you qualify for the credit. This means, that if you owned rental property and have rented it out for the past three years while residing elsewhere (in property you do not own), you qualify for the credit. So, if you purchased any property this year, then I would highly recommend speaking with a tax professional to find out if you qualify or not. You may be pleasantly surprised.
Non-Houses Qualify Too
As I mentioned before, if you purchased any property in the past year you may qualify for the credit. It actually applies to multiple different types of property including condos, townhouses, motor homes, and even houseboats. As long as the property is your principal place of residence, you can qualify for the credit. Therefore, a summer or vacation home would not qualify.
In order to qualify for the full $8,000, your adjusted gross income (AGI) needs to be under $75,000 for single taxpayers and $150,000 for married filing jointly. If your income is above those limits, then the amount of the credit will be reduced depending on exactly how much money you made this year. If your AIG exceeds $95,000, or $170,000 for married couples filing jointly, then you will not qualify for any of the credit.
Instant Money vs. Waiting
If you are in the process of purchasing a home then you may not have to wait until next year to get the credit. You actually have a few different options. First of all, the IRS will allow you to claim the credit on your 2008 return, meaning you can amend your old return and get the money within a few weeks. Alternatively, if you are taking advantage of an FHA loan then you can use the credit towards your closing costs, or for an additional down payment. Finally, you could wait and claim the full $8,000 credit on your 2009 tax return this April.
Future of the Credit
As the credit's expiration date gets closer and closer, many are pushing Congress to extend and expand the credit. In fact, the National Association of Realtors and the National Association of Home Builders have spent a lot of time and money lobbying Congress. They are hoping to get the credit extended into 2010, raise the amount to $15,000, and make it available to all homebuyers. Senator Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, and Senator Johnny Isakson (R-Ga.) have sponsored a bill that would expand the credit, but it is very unlikely any legislation will get passed into law before the November 30th deadline.