First Time Home Buyer Tax Credit Extension: More Fuel for the Charleston, SC Market

We’ve had great news in the housing market this past week!  The $8,000 First Time Home Buyer Tax Credit will be extended through April 30, 2010.  This extension is good news especially for first time home buyers taking advantage of the credit.

But, even if you don’t qualify for it, know that you should benefit indirectly from it.  It’s been a very effective incentive for getting homes sold in Charleston, and as Realtors we’ve seen the results firsthand in our area.  The extension is expected to help continue the healthy growth that we’ve seen in the Charleston real estate market in the past few months.

I have included below more of the details regarding the tax credit extension.  These are important to note because this go round, there are more provisions to meet compared to the original tax credit.

1)  The IRS defines a first-time home buyer as someone who has not owned a principal residence for the three years prior to purchase.

2)  The amount is equal to 10 percent of the home’s purchase price, up to a maximum of $8,000.

3)  The purchase price of the home must be $800,000 or less.

4)  The time frame includes sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, if a binding sales contract is signed by April 30, 2010, a buyer can still qualify if he/she closes by June 30, 2010.  Buyers who are in the military have some special extensions for these deadlines, so be sure to tell your lender if you meet this qualification.

5)  For homes purchased on or after January 1, 2009 and on or before November 6, 2009:  single tax payers must meet the income limit of $75,000 (for married couples filing jointly, their income must not exceed $150,000).

6)  For homes purchased after November 6, 2009 and on or before April 30, 2010:  single tax payers must not exceed the income limit of $125,000 (married couples filing jointly must not exceed $225,000).

7)  The main benefit of a tax credit is that it works as a dollar-for-dollar benefit.  If it were a tax deduction, it would only reduce your tax liability and would only save you $1,000 to $1,500 in the long run. So, let’s say you are a first time home buyer qualifying for the entire credit.  If you owe $8,000 in income taxes qualify for a tax credit of $8,000, you would owe nothing.

8)  The tax credit is also refundable, which means you can receive a check for the credit if you have little or no income tax liability. So, let’s say you are eligible for a tax credit of $8,000, and you owe $3,000 in income taxes.  You can still receive a check for the remaining $5,000!