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President Barack Obama signed into law a $24 billion economic stimulus bill providing tax incentives to prospective home buyers. According to the Associated Press, the bill is expected to contribute $22 billion to the economy, offering qualified home buyers up to $8,000 in tax incentives until April 30, 2010!

The current bill will offer First Time Home Buyer's $8,000 in tax incentives, if they have not owned a home in the last 3 years.

The extended tax credit has also established a new incentive for Move-Up Buyers! Qualified home owners could receive up to $6500 in tax incentives to purchase a new primary residence between November 6, 2009 and April 30, 2010.

Here are some important things you should know... 

• First Time Home Owners income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return.
  
  According the the National Association of Home Buildersthe income is calculated based on this formula...

The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

• Move-up Buyers need to make no more than $125,000 for single buyers and $225,000 for couples
  
  According the the National Association of Home Buildersthe income is calculated based on this formula...

"The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains."

To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

I recommend you talk to your CPA for a more plain English version!

• You can not purchase a home from your family members or your spouse's family members.
  
• You can purchase any new primary residence for a purchase price less than or equal to $800,000.
  
• You must have lived and owned your current home for at least five consecutive years of the eight years prior to the purchase date.
  
• You can down size your home.
  
• You can build a home, but the first occupancy must be after November 6, 2009 and on or before April 30, 2010
  
• Non-resident aliens can qualify for the tax credit if they meet all requirements. Ask your CPA for specifics!
  
• Newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
  
• The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $6,500. This tax credit is a dollar-for-dollar reduction in what the taxpayer owes to the IRS. Any leftover tax benefit would be mailed to the home buyer in the form of a check.

This is exciting and I am sure it will stimulate the currently non-existing Move-up Buyer market! Hopefully the banks will release some more of their inventory! There are hungry buyers out there who want to get into a home before Christmas!

Have question about the tax credit? Post a comment and I will try to point you in the right direction!

Happy Hunting!

If you (or your client) purchased a new home (new construction) on or after March 1, 2009... Did you know that you can apply for a special tax credit?

California allocated $100,000,000 for this tax credit on a first-come, first-served basis for home buyers that purchased a newly constructed home on or after March 1, 2009. Once $100,000,000 has been allocated, the tax credit will no longer be available.

This morning California Franchise Tax Board posted an announcement that they would not accept applications after TONIGHT at midnight! What! 

How to apply

• Within one week (seven calendar days) after the close of escrow:
  • The seller must complete Part I of Form 3528-A, Application for New Home Credit, certifying that the home has never been occupied, and provide a copy to the buyer or escrow person.
  • The buyer will complete Parts II & III of Form 3528-A.
  • The escrow person, on behalf of the seller and buyer, will fax the completed Form 3528-A to FTB at 916.845.9754 and provide a copy to the buyer.
• Fax is the only delivery method that will be accepted and considered for credit allocation by FTB, as the date and time stamp on the fax will determine the order in which credits are allocated. The date and time applications are received may not be reviewed in any administrative or judicial proceeding.
• Fax only one completed application per residence with all qualified buyers listed. Do not include information on nonqualified buyers. An incomplete application may delay or prevent credit allocation.
• Do not fax the application to FTB before escrow closes.
• Do not fax the application to FTB more than once. We will process the applications in the order received as quickly as possible.
• Escrow companies should only send one application per fax transmission.
• The buyer keeps a copy of the completed Form 3528-A for their records.
• The Form 3528-A is now available online as a fillable form. Simply fill in all required information, print the form, and sign. If you fill out the form by hand, please print numbers as clearly and neatly as possible using CAPITAL LETTERS and staying between the lines. The faxes can be very hard to read.

Please note this deadline does not apply to the $8,000 First Time Home Buyer tax credit... this is still in effect.  This only applies to folks who purchase newly constructed homes (never lived in before).

Here is a link to the announcement! >>

Please note in order to apply for the tax credit, escrow needs to have been closed!