Posted by: Brian Powers | June 22, 2009

Get the Most Out of the $8000 First-Time Home Buyer Tax Credit

There was an informative, concise article in yesterday’s Free Press giving some tips how to use the $8000 First-Time Home Buyers Tax Credit to your adavantage.  The clock is ticking on the life of this tax credit. It is set to expire on 12/1/2009 (meaning you have to complete the purchase of your home by 12/1/2009.  That may seem like a long-time from now, but really it’s not.

In order to ensure you close on the sale of your home by 12/1/2009, you really should have a purchase agreement in place by October 1 in order to ensure you leave enough time for an unforseen issues that would cause a delay in closing. October 1 is only about 3 months away…so if you are thinking of using this tax credit this year, you really need to start your home search soon if you have not already.

Here is a video offering an in-depth explanation of the tax credit:

Here is the aforementioned article in yesterday’s Detroit Free Press:

It seems there’s a new program every week to tap the $8,000 tax credit for first-time homebuyers. The credit can be claimed on 2008 or 2009 tax returns. Homebuyers who get a loan backed by the Federal Housing Administration can use the money to cover closing costs and other fees, and at least 10 states offer ways to use the tax credit faster. “There are some real neat tax-planning strategies you can apply now,” said Bob Meighan, vice president of TurboTax. To be eligible, a buyer cannot have owned a home in the past three years. So if you’re ready to buy, here are some tips:

INCOME CONSIDERATIONS: The tax credit, for home purchases made through the end of November, comes with income thresholds of $75,000 for individuals and $150,000 for joint filers. After those limits, the credit begins to phase out. If you bought a home this year and expect your 2008 income to be lower than next year’s, it makes sense to file for the credit this year using a 2008 amended return.

However, if you think your income will decrease, it makes more sense to file for the tax credit on your 2009 tax returns.

TAX WITHHOLDING: Another benefit to waiting until 2009: You can increase your take-home pay. By taking the credit next year, you can change your tax withholding status with your employer now and get more on a paycheck-to-paycheck basis, Meighan said.

You’ll be giving up a fatter tax refund next year, but you’ll have more in your pocket.

Also, don’t forget to reduce your federal and state tax withholding to account for the tax deduction you can take on the mortgage interest and property taxes you pay.

BRIDGE LOANS: Ten states (not Michigan, but the list keeps growing) are offering so-called bridge loans for the federal tax credit, so homebuyers can take advantage of the $8,000 before the 2010 filing season. Qualified homebuyers can receive a loan with little to no interest and repay it with the tax credit refund.

Some nonprofit organizations like NeighborWorks America also are offering bridge loans for the tax credits.

ADVANCE CREDIT: Last month, the FHA said its borrowers can receive advances on the tax credit from lenders, so they don’t have to wait to get the money next year from the Internal Revenue Service.

Borrowers still will have to come up with the FHA’s required 3.5% down payment, but the advance from the tax credit can be applied toward closing costs, fees or to increase the down payment.

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Ready to start your home search? Sign up today for a FREE Listing Book account to get direct access to the MLS and search for homes for sale.  Follow this link to get started: http://www.brianpowers.listingbook.com/

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