Housing Tax Credits

First-time home buyers, repeat home buyers, and real estate investors are taking advantage of the dip in housing prices to purchase real estate at incredible values. The federal housing tax credit of $8,000 for first-time home buyers and $6,500 for repeat buyers has expired for most people.  However, buyers who have secured a binding sales contract by April 30, 2010 have until September 30, 2010 to complete their purchase and still qualify for the housing tax credit.  In addition, Congress has granted extensions for active military and qualified service personnel. First-Time Home Buyers Housing Tax Credit

• The $8,000 housing tax credit is for first-time home buyers only.
• A first-time home buyer is someone who has not owned a principal residence during the 3-year period prior to the purchase of the qualifying home.
• The tax credit does not have to be repaid unless the home is sold or is not used as the buyer’s principal residence within 3 years after the initial purchase.
• The tax credit is equal to 10% of the home’s purchase price (priced at $800,000 or less), up to a maximum of $8,000.
• For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
• For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

Repeat Home Buyers Housing Tax Credit

• The $6,500 housing tax credit is for buyers who have owned and lived in their previous home for 5 consecutive years out of the last 8 years.
• The tax credit does not have to be repaid unless the home is sold or is not used as the buyer’s principal residence within 3 years after the initial purchase.
• The tax credit is equal to 10% of the home’s purchase price, up to a maximum of $6,500. Homes that are purchased for over $800,000 are not eligible for the credit.
• Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

Special Considerations for Qualified Service Members The government has afforded members of the military, the Foreign Service, and the intelligence community special considerations that apply to both the $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers. Exemption from Housing Tax Credit Recapture Rules Homes that are sold or that are no longer used as a principal residence within 3 years of the initial purchase due to official extended duty will not be subject to recapture of the tax credit as indicated for non-qualified service members. Extension of Tax Credit Deadlines

• The home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010.
• However, for qualified service members who are ordered on a period of official extended duty, these dates are extended for 1 year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011.
• A person who is forced to return to the U.S. for medical reasons (before completing an assignment of at least 90 days of qualified official extended duty outside of the United States) may qualify for the 1-year extension.

The Low-Income Housing Tax Credit (LIHTC) The American Recovery and Reinvestment Act (ARRA) of 2009 appropriated $2.25 billion to be allocated to the Tax Credit Assistance Program (TCAP). The TCAP is a grant program that provides funds for capital investments in stalled Low-Income Housing Tax Credit (LIHTC) projects. The Low Income Housing Tax Credit (LIHTC) program was originally created by the Tax Reform Act of 1986 as an alternate method of providing rental housing (sometimes referred to as “Section 8 Housing”) for low- and moderate-income households, and the elderly and disabled. The LIHTC program has been in operation since 1987. The U.S. Department of Housing and Urban Development (HUD) administers federal aid to local housing agencies that rent to low-income residents at affordable prices. Investors and developers interested in learning more about these housing tax credits may visit the HUD website.

 

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