Over the past two years I have met with many Raleigh area home sellers who wanted to sell and buy a new home. However, the declining Raleigh real estate market wasn’t going to allow them to net enough money from the sale to be able to purchase a new home. The Government has now stepped up and is helping Raleigh area move up buyers by giving them a $6,500 tax credit if they buy before April 30, 2010.
How Will A Raleigh Homeowner Benefit?
The $6,500 tax credit will really help many sellers offset any depreciation they may have experienced in the Raleigh Real Estate market and will give them the extra funds they need to buy a new home. When selling a home you have to deduct the mortgage pay off, property taxes, real estate commissions, revenue stamps and other miscellaneous charges for selling a home. The remainder after everything is paid is the net proceeds. Or better described the check the seller gets at closing to spend on their new house. The Government is giving them an additional $6,500 tax credit to help home sellers in Raleigh buy new homes. This is pretty exciting especially when you consider mortgage interest rates are still around 5% for a 30 years fixed rate mortgage. The low interest rates and the tax credit will help many homeowners get into better houses than they ever dreamed.
Raleigh Mortgage Lending Guidelines Have Changed
Today in order to buy a home most lenders require a minimum of 5% down. We can usually negotiated to get the mortgage closing cost paid by the seller but, when the Raleigh housing market hasn’t appreciated over the past several years it makes it really hard to sell and be able to net enough money from the sale for the down payment on a new home. The $6,500 tax credit will put many home buyers in the market now that could only sit and wait before. Here are some details:
Who is Eligible
- Existing home owners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.
- All U.S. citizens who file taxes are eligible to participate in the program.
- Home buyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
- For married couples filing a joint return, the combined income limit is $225,000.
- Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
- The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
- The eligibility period for the tax credit is for homes purchased after Nov. 6, 2010, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.
Types of Homes that Qualify
- All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.
Tax Credit is Refundable
- A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
- For example:
- A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
- All qualified home buyers can take the tax credit on their 2009 or 2010 income tax return.
- The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.
The www.federalhousingtaxcredit.com site is being updated and you can find alot of useful information there.
Please remember to talk with your CPA or tax advisor to verify how the tax credit can help you and your family. I am not a tax advisor but have given you the information above as I understand it.
Hope you stay warm today!