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The Countdown Has Commenced - 2010-01-24
THE COUNTDOWN HAS COMMENCED
Three Months, Seven Days, and Counting

From today, you have exactly ninety-seven days to find a house, negotiate with the seller, and get it under contract. If you can do that by midnight on Friday, April 30th, you'll likely qualify to pick up a check from the government for as much as eight thousand dollars. But after that moment, don't look for an extension of the program - it probably won't happen.

The First Time Home Buyer Tax Credit has been a success. Sales of existing homes have increased almost steadily since last April. And the National Association of Realtors reported recently that first time home buyers accounted for about 30 percent of all sales last year.

The IRS defines first-time buyers as anyone who has not owned a principal residence in the last three years. The tax credit is for 10 percent of the purchase price, up to a maximum of $8,000, and does not have to be paid back. The credit begins to phase out for buyers with an income of $125,000 for singles and $225,000 for joint filers.

The tax credit was extended and expanded to include more Americans in November. At the same time, a Repeat Home Buyers Tax Credit was initiated to encourage existing homeowners to move and purchase another house. Again, there are income limits, and the home being purchased must cost less than $800,000. And once again, the credit is for 10 percent of the purchase price, up to a limit of $6,500. "Repeat Buyer" is defined as anyone who has owned their own principal residence for at least 5 of the past 8 years.

An often overlooked benefit of a tax credit is that the payment is not considered income, so it is totally tax-free. If you qualify, you get the full benefit of each and every dollar, undiminished by your friendly tax collectors.

But the fun is set to end on midnight on Friday, April 30th at the stroke of midnight. Any buyers whose contracts are not binding by then will be ineligible to participate in the program.

And don't look for another extension of time for the credit. With government deficits at an all time high and the real estate market mounting at least the beginnings of a recovery, politicians are unlikely to continue what can only be described as a substantial subsidy for the American dream.

The $8,000 First Time Homebuyer Tax Credit and the $6,500 Repeat Homebuyer Tax Credit are both set to expire at the end of April, although if you have a binding contract by that date, you can have until the end of June to get it closed. My advice is to take the money and run.

 
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