BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
First Time Homebuyer Tax Credit
The federal tax credit of up to $8000 is scheduled to end on November 30, 2009. Many buyers are buying in reliance on obtaining that tax credit. However, a delay in the closing can result in a buyer losing that credit.
That tax credit may be extended, but there is nothing concrete at this time. We will advise you if there is an extension to this program.
PRACTICE TIP:
1. If you have a buyer who is planning on taking advantage of that tax credit, ask your buyer to sign this two page Advisory and Fact Sheet.
2. If this tax credit program is extended, then this Advisory will no longer be needed until the end of THAT extension; at which time we will issue an updated Advisory.
DO NOT FORWARD TO SELLERS OR BUYERS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
(Insert Company Name)
FIRST TIME HOME BUYERS ADVISORY
REGARDING TAX CREDIT
The federal government is providing a first time home buyer credit of up to $8,000 for the purchase of a principal residence by qualified purchasers who acquire their home in 2009. However that program is scheduled to end as of December 1, 2009. Although other incentive programs, such as the “cash for clunkers” giveaway, were extended beyond the originally scheduled termination date, there is no indication that the first time home buyer credit will be extended beyond its originally scheduled termination date.
To qualify for the credit, the first time home buyer must close escrow on or before November 30, 2009 and meet other eligibility requirements as specified on the attached Fact Sheet. Unfortunately, many factors can delay the close of escrow including but not limited to the buyer’s ability to secure financing, the seller’s ability to resolve any and all outstanding financial obligations affecting the property as well as the condition of the property. Real estate brokers have no control over any or all of these potential timing problems and thus brokers are not able to guarantee the precise date that escrow will close.
As your broker, we cannot represent, promise or guarantee that any particular buyer will be able to take advantage of any tax credit or incentive program. It is the buyer’s responsibility to determine for themselves in consultation with their legal and tax advisors as to whether or not they will be able to benefit from any tax credit or incentive program in the purchase of any real property.
The undersigned buyer acknowledges receipt of this one page Advisory and the attached one page Fact Sheet.
Buyer: ___________________________________ Date: _________2009
Buyer: ___________________________________ Date: _________2009
2009 First-Time Home Buyer Tax Credit Fact Sheet
Who is Eligible?
• The $8,000 tax credit is available for first-time home buyers only.
• The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase.
• All U.S. citizens who file taxes are eligible to participate in the program.
Payback Provisions
• The tax credit is a true credit. It does not have to be repaid.
• The only repayment requirement is if the home owner sold the home within three years after the purchase.
Income Limits
• Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their modified adjusted gross income (MAGI) is less than $75,000.
• For married couples filing a joint return, the income limit doubles to $150,000.
• Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit.
• Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.
• The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples with a MAGI that exceeds $170,000.
Effective Dates for the Tax Credit
• First-time home buyers would receive an $8,000 tax credit for the purchase of any home on or after January 1, 2009 and before December 1, 2009. To qualify, you must actually close on the sale of the home during this period.
Tax Credit is Refundable
• A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference.
• For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government.
• If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from the home buyer tax credit).
• Buyers can take the tax credit on their 2008 or 2009 income tax return.
Types of Homes that Qualify for the Tax Credit
• All homes, whether single-family, townhomes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a principal residence in the prior three years. This also includes newly-constructed homes.
For more details on the tax credit, go to www.federalhousingtaxcredit.com
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