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Home owners, here's your handout!

E-mail|Link|Comments () Posted by Rona Fischman November 9, 2009 01:50 PM

The first-time home buyer’s tax credit has now become an any-home buyer’s tax credit. This credit has been a recurring topic here. I find this credit bad for buyers, in the long run. I think the tax credit is a way to stimulate demand. Increased demand is not in buyers’ interest.

Late in September this year, I went out of a limb. Not only did I predict the continuation of the tax credit, I named the week it would happen. This prediction was instinctive; it was based on my feeling about how the tax credit would most influence buyers to buy now.

Since I know the government doesn’t listen to little old me, let me explain why this timing makes sense:
The old deadline (closing by November 30, 2009) gave would-be buyers a sense of urgency. That flogged sales through the fall market. The new deadline is at April 30, 2010 (to be under agreement. Closing can take place until July 1, 2010.) That will give buyers incentive to be under contract by the end of April, feeding the spring market. Very smart, if you want to create a frenzy. Buying in a frenzy is not the way for a buyer to get a good deal.

Now that I am done dissing the credit, some of you still want to know what it is all about, right?

Here is a handy chart laying out all the basics.
It is $8000 for first-time home buyers. $4000 for each spouse, if filing separately. The credit is now extended to people who already own a home. They get a $6500 credit. Half each for couples, if filing separately. The house has to be under contract by April 30, 2010 and must close by July 1, 2010.

Income limits go up from $75,000 for a single, $150 for a couple to $125,000 for a single and $225,000 for a couple. This is based on Modified Adjusted Gross Income (MAGI.)

There are also some provisions to catch the fraud that has been going on in regard to this credit.

All these changes went into effect on Friday, November 6, 2009.
If you want to use your credit towards your down payment, I think red lights and warning bells should go off in your head. But, some of you want to know how.
If you want to get your tax credit before April 2011, there are ways to do that. The IRS explained it in regard to the old credit. The same rules apply.

Homeowners, now that the stimulus includes you, are you less negative about it? Does this change your plans for 2010?