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Money Girl
151 MG New Tax Tip for All Home Buyers
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Hello, everyone, and welcome back to Money Girl's Quick and Dirty Tips for a richer life. I'm your host, Laura Adams. The topic of this episode is how to save money by claiming the new and improved tax credit for homebuyers. You may have heard about the first time homebuyer credit. That's the $8,000 tax incentive that was created earlier this year to stimulate the U.S. economy by enticing some people to buy or build a home. It's part of the American Recovery and Reinvestment Act of 2009. The rule was that you had to close on a home before December 1st of 2009, and that neither you nor your spouse could have owned a home within the prior three years. But the rules have now changed for the better. The new legislation is part of the worker, home ownership, and business assistance act of 2009, which was signed into law on November 6th. It expands eligibility for the homebuyer credit to those who already own a home and extends the deadline to qualify. Here are three major changes to the law. Number one, there are now two deadlines to meet. The first is when you have to enter into a binding purchase contract for a primary residence. That deadline is on or before April 30th of 2010. The second deadline is when you have to complete the legal closing. That's by midnight on June 30th of 2010. So now you have five additional months to get a home under contract and two more months to secure financing and do everything to get a deal closed. Number two, the second major new rule is what many people were hoping for that current homeowners could also take advantage of the credit. The catch is that a new home must be a replacement for your primary residence, not a second home or a rental property. You also must have lived in your current home for five consecutive years during the eight years that proceed a purchase. For long-time homeowners, the maximum credit you can receive is 10% of the purchase price up to $6,500. That's $1,500 less than the credit for first-timers. Number three, the third change is that those with higher incomes can now qualify for the credit for homes purchased after November 6th of 2009. Modified adjusted gross income can go as high as 145,000 for individuals and up to 245,000 for joint filers. When you claim the home buyer credit, you're making a deal with the government that you're going to stay in the new home for a minimum of three years. If you take the credit but then stop using the property as your primary residence within 36 months after the purchase, you forfeit the credit. Repayment would be due in full and the tax year the home ceased to be your principal residence. If your qualifying home purchase was or will be in 2009, you have the choice of claiming the credit on either your 2008 or 2009 tax return. If you already filed your 2008 return, you can file an amended return. If you make a qualifying home purchase in 2010, you have the choice of claiming the credit on either your 2009 or 2010 return. You claim the credit on IRS Form 5405 and send it in along with your regular tax return. The credit is fully refundable, which means that you get it even if you don't owe any taxes, so the credit will reduce your tax bill or increase your tax refund dollar for dollar. There are a few more important restrictions to keep in mind. You can't buy your home from a family member nor can you purchase a home that exceeds $800,000 to qualify for the credit. And remember that you can't claim the credit in anticipation of a home purchase. The sale must be finalized. If you're interested in buying or building a new home for your primary residence, be sure to find out if you're eligible for this tax incentive. For more information, see the links that I've included at the bottom of the show transcript at moneygirl.coicandertietips.com. With my favorite holiday Thanksgiving, just around the corner in the United States, I wanted to let you know how grateful I am to have you as a listener or reader. Whether you subscribe to the podcast and iTunes, have purchased one of my audiobooks, like Money Girl's 10 Steps to a Debt-Free Life, or recommend the show to friends or family during a conversation over a Thanksgiving feast, it means a lot to me. Your support is what makes the weekly podcast and blog call impossible. I'm glad you're listening. Shaching. That's all for now. Courtesy of Money Girl. You're going to a richer life. With the Wells Fargo Active Cash Credit Card, you can earn unlimited 2% cash rewards on purchases you want and purchases you need. That means you earn on what you want, like trying out that new workout class, and 2% cash rewards on what you need, like a foam roller for your sore muscles. That's the beauty of the Active Cash Credit Card. It's ready when you are, with unlimited 2% cash rewards. The Wells Fargo Active Cash Credit Card. That's real life ready. Terms apply. Learn more at Wells Fargo.com/activecash. Earning your degree online doesn't mean you have to go about it alone. At Capella University, we're here to support you when you're ready. From enrollment counselors who get to know you and your goals, to academic coaches, who can help you form a plan to stay on track. We care about your success and are dedicated to helping you pursue your goals. Going back to school is a big step, but having support at every step of your academic journey can make a big difference. Imagine your future differently at capella.edu [BLANK_AUDIO]