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Deadline Looms for First Time Home Buyers - 2009-09-20
Are you a first time homebuyer?  If so, it's time to sit up and take notice.

If you have been sitting on the proverbial homebuying fence, you have just over 60 days to find what you want, get it under contract, obtain financing, and get closed.

If you can pull that off, you may still qualify to pick up a check for $8,000 in cold, hard, tax-free cash. But the Federal First Time Homebuyer Tax Credit is set to expire at midnight on the last day in November, and closings after that date won't qualify.

This tax credit:

* applies only to homes closed between now and midnight on November 30, 2009.
* is available only to those purchasing their principal residence.
* reduces your tax bill (or increases your refund) dollar for dollar.

For the purposes of this credit, a first-time homebuyer is one who has not owned a principal residence anytime during the past three years. Ownership of vacation property or rental homes will not disqualify you.

Here the questions I am most often asked:

Q: Are there limits on purchase price or location?

A: There is no limit on price, but the credit is ten percent of the purchase price, up to a maximum of $8,000. The purchased home must be located inside the United States.

Q: Are there other restrictions?

A: Yes. The credit phases out for individuals earning more than $75,000 and for couples earning more than $150,000. Also, you must own and occupy the house as your principal residence for at least three years. If you move, the entire credit must be paid back.

Q: I have been renting for several years. If I buy this house from the owner under an owner financing arrangement, will I still get the credit?

A: Owner financed sales are eligible under the program.

Q: Can I buy a house from my parents?

A: No. Homes purchased from close relatives are excluded from the program, but step-relatives are not considered close relatives, so you could purchase a home from a step-parent.

Q: Can I buy home now, rent it out for a few months, then move in and still qualify?

A: No, you must be closed no later than November 30, 2009 and it is expected that you would occupy the house immediately as your principal residence.

Q: I heard that the government payout on the Cash for Clunkers program was going to be taxed. Is this tax credit treated the same way?

A: No. Tax credits are not considered as taxable income. Even if you have no liability for income taxes, you can still receive a check for the amount of your credit.

Q: Can I buy a new house and still get the credit?

A: Yes. New construction qualifies provided you close and occupy by the deadline of November 30.

Q: How can I know for sure if I qualify?

A: Visit IRS.gov and search on "homebuyer" for detailed information. Your tax preparer is best qualified to explain the rules.
 
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