First Time Homebuyer?

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You might be a bit afraid or intimidated by the whole process of buying your first home. As top Monroe County, and Rochester Real Estate Experts, it’s our job to guide you, from beginning to end.
Below is an exciting new Tax Credit we were just notified of. We view our Real Estate Website as a Resource for Buyers and Sellers. That’s why we post helpful information like this as it comes to us! Call today to learn how to Buy A Home! 

New Tax Credit for First-Time Homebuyers 

New law, The Act gives eligible first-time homebuyers a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately). (Code Sec. 36 , as amended by Act § 301)  

The credit, which is generally allowed for the tax year in which the principal residence is bought, phases out for individual taxpayers with modified adjusted gross income (AGI) between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of purchase. A taxpayer is considered a first-time homebuyer if he (or spouse, if married) had no present ownership interest in a principal residence in the U.S. during the 3-year period before the purchase of the home to which the credit applies.  

Any home purchase (including, presumably, coops and condos) qualifies but only if (1) the property isn’t acquired from a person related to the buyer (under detailed rules in new Code Sec. 36(c)(5) ); and (2) the basis of the property in the hands of the buyer is not determined by reference to the adjusted basis of the property in the hands of the person from whom it was acquired, or under Code Sec. 1014(a) (property acquired from a decedent).  

A home under construction by a taxpayer is treated as purchased by him on the date he first occupies it.  

Regular recapture rule. The credit for new homebuyers is recaptured ratably over fifteen years, with no interest charge, beginning with the second tax year after the tax year in which the home is purchased. For each tax year of the 15-year recapture period, the credit is recaptured as an additional income tax amount equal to 6 2/3% of the amount of the credit. (Code Sec. 36(f)(1) , Code Sec. 36(f)(7) )  

RIA observation: In other words, the credit for new homebuyers is, as a practical matter, the equivalent of an interest-free loan from the government.  

RIA illustration: Frank and Mary Smith, eligible taxpayers with modified AGI below the phaseout limits, buy a $200,000 principal residence in August of 2008. They may claim a first-time homebuyer credit of $7,500 on their 2008 income tax return (lesser of $20,000 (10% of the $200,000 cost of the home) or $7,500). On their income tax return for 2010, the Smiths will pay an additional income tax amount equal to $500 (6 2/3% of $7,500). They also will pay an additional income tax of $500 on their income tax returns for tax years 2011 through 2014 (assuming they own the home and use it as a principal residence for that period).  

Accelerated recapture rule. If a taxpayer who claims the credit for new homebuyers sells the home (or he or his spouse no longer use it as a principal residence) before complete repayment of the credit, any remaining credit repayment amount is paid with the tax return for the year in which the home is sold (or ceases to be used as the principal residence). However, the credit repayment amount can’t exceed the gain from the sale of the residence to an unrelated person. For this purpose, gain is determined by reducing the home’s basis by the amount of the credit to the extent not previously recaptured. ( Code Sec. 36(f)(2) , Code Sec. 36(f)(3) )  

Effective date. The new homebuyer credit applies for qualifying home purchases after Apr. 8, 2008 and before July 9, 2009. (The Committee Report says this applies whether or not there was a binding contract to purchase the home before Apr. 9, 2008).  

Election for 2009 buyers to accelerate credit into 2008. Eligible first-time homebuyers who purchase a principal residence after Dec. 31, 2008, and before July 1, 2009, may elect to treat the purchase as made on Dec. 31, 2008. (Code Sec. 36(g) .  

RIA observation: The election effectively allows eligible first-time homebuyers who make a timely purchase in 2009 to claim the credit on their 2008 returns rather than on their 2009 returns.  

 

 

We will take the time to go through each and every step of the buying process. There are no dumb questions! 

Together, we will consider: 

– How much can you really afford? 

– How to qualify for a mortgage. 

– How much cash you should put down. 

– How to buy a home with little or nothing down. 

– What it takes to get approved for financing. What banks and other financial institutions are looking for. 

– How much your payments will be. 

– The tax advantages of buying. 

– Is renting or buying better for you? 

Tell us a bit about your situation below. We’ll get right back to you. There is absolutely no charge, and we offer this to you with no strings attached. 

New to the home buying process? Tell us your concerns. Ask us questions. It’s our job to help! There’s no obligation, and we promise to get back to you quickly… 

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Salafia Sold Team
Sal, Nunzio and Davide Salafia
RE/MAX Plus

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Rochester, NY 14618
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