CONTACT US
Government programs can be a little tricky to grasp at first. Sometimes our suspicions rise because programs read like an auctioneer spouting random fine print. Since we often get leery about the vague subject matter we may choose not to pluck the proverbial fruits of a given program. This article is meant to dispel any illusions about the Federal Tax Credit. It’s actually quite a simple program once you know who can receive the benefits.
There are two forms of the Federal Tax Credit: the $8k and $6.5k. We’ll use some sample scenarios involving a St Pete Beach home to help illustrate.
The first option:
Let’s start with the $8k option. This is a tax credit for FIRST-TIME BUYERS ONLY. However, the way the IRS defines “first-time buyers” is this: “a buyer who has not owned a principal residence during the three-year period prior to the purchase.” This means that if you have owned before, but not in the last three years, you are again a first-time buyer. The credit amount is 10% of the total cost of the home, up to $8,000, and it only applies to homes that are less than $800k. This offer began January 1st, 2009 and will expire April 30th, 2010.
For example - A sample of the simplest scenario. You’ve been renting for years and have finally decided to take the plunge – now is the time to buy! You’ve found a fantastic St Pete Beach home in the form of a condo on Gulf Boulevard. Your offer has been accepted and you’re under contract to close on April 5th for $249,000. You qualify!
Another example – You owned your St Pete Beach home until 2005, when it was sold due to your relocation. Upon relocating, you rented for a few years instead of purchasing. Now back in the area, you’ve found a great opportunity to purchase a waterfront property in Yacht Club Estates. The contract has been finalized and you’re closing on April 19th at $699,000. You qualify!
The second option:
The other form of Federal Tax Credit is the $6.5k. This credit applies to those who currently own a home, and have lived in that home as a primary residence for at least 5 of the last 8 years. Like the $8k form of credit, it also only applies to houses which cost less than $800k, and is calculated as being 10% of that total cost. The only difference is the ceiling on this policy is $6,500. This offer began November 6th, 2009, and will expire April 20th, 2010.
For example - You purchased your St Pete beach home in 2001. It was your primary residence from 2001 to 2004, when you purchased another property in Old Northeast which then became your primary residence. Ownership of the residence in St Pete Beach was maintained while it was rented for a few years. In 2006, you moved back into the beach home as your primary residence. You’ve now found a fantastic new opportunity to purchase the home of your dreams on Snell Isle which you have under contract to close on April 12th at $725,00. Despite the fact that you currently own a home, you still qualify!
In order to claim this credit, make sure you do so when filing your income tax returns. Both the $8k and $6.5k versions of the credit require IRS Form 5405, which will aid in determining the amount of tax credit to be received. In order to be eligible the property must close before July 1st.
Follow us on