Clarification to the home buyers tax credits
April 26, 2010 by avoidforeclosureteam
Filed under Foreclosure Process
There is a little bit of confusion out there on the home buyer tax credits, so hopefully this clears if up…
Federal Tax Credit
The first time home buyer tax credit extension allows a buyer to enter an agreement with a seller by April 30, 2010 and close on the house by June 30, 2010. First time home buyers are defined as anyone who has not owned a home for the past 3 years. First time home buyers will get an $8,000 tax credit. Other home buyers, who have owned their current home for at least five years, are eligible for a $6,500 tax credit. Income limitations have been increased to $125,000 for single filers and $225,000 for joint filers. The purchase price of the home must be less than $800,000.
California Tax Credit
The home buyer must be a California taxpayer, and there is no limit on the income of the home buyer. The program is available to both existing homeowners and first-time home buyers, however for existing home owners, a newly built home must be purchased. To be a first time home buyer, you cannot have owned a home anywhere in the world during the three years prior to buying your new home. If you’re married, that applies to your spouse as well. The tax credit is worth up to 5% of the purchase price of the home, or $10K, whichever is less. The payment is credited against the home buyer’s annual CA state income tax, with the total payment being spread evenly over three years. If you qualify for the full $10K, you’d get up to $3,333 per year – but only if you pay at least that much in annual CA state income tax. If your CA state income tax is $4,000 a year, you get a $3,333 credit against that amount, effectively lowering your state income tax to $667. If you owe less than $3,333 per year in CA state income tax, you’ll receive a tax credit only for that amount. The extra will not roll over into the following year’s payment. The credit will begin to be applied to the tax year in which the home was purchased. If you buy your home in 2010, the tax credit will begin to be applied against your 2010 taxes. You cannot apply the tax credit to your 2009 taxes, even if you file your 2009 taxes after you purchase your home.
Still have questions, please contact your tax advisor.
Clarifying Home Buyer Tax Credits
