Many people have been asking recently how the Federal tax credit works for home purchases. Here is the straight dope:
- Have not owned a home in the last 3 years (this means you have not been on the title of a primary residence)
- Have income less than $250,000 last year
- Are purchasing a home less than $720,000 in value
- Have your new home under contract (this means a written agreement signed by both parties) by April 30
- Close the purchase (this means sign the documents, fund the loan, and transfer the title into our name) by June 30
then you qualify for an $8000 tax credit on your federal taxes. The credit is fully-refundable, meaning that you get it even if you owe no tax. You may file it on your 2009 taxes. You may also file your taxes now, close later, and file an amendment claiming the credit. The rumor is that the IRS will audit everyone that takes this credit* (seems unlikely, but that’s the rumor), so be forewarned.
For the long-time homeowner tax credit:
- Have owned your primary residence for at least 5 years
- Have occupied that home as your primary residence for four consecutive years of the five
- Purchase a new home (new to you, it does not have to be new new)
- Get the new home under contract (see above) by April 30
- Close the purchase (see above) by June 30
then you qualify for a $6500 federal tax credit. Same terms apply as those above, except that there is actually a way to document your qualifications, and you should expect to have to. Ask for a copy of the title report on your current home; your mortgage lender should be happy to provide that. We are, anyway.
*It being impossible to prove a negative – how, exactly, can you prove that you have NOT been on title on a home in the last three years? – I don’t know how the IRS will be able to dispute this. They will surely ask for a credit report, and it would be a really good thing if there were no active mortgages on it in the last three years. But if you own a home outright, it’s going to be complicated for the IRS to prove that, especially if you have some sort of rent that you claim on your taxes. Not encouraging anyone to cheat, here; I’m just sayin’.