First-Time Buyers: Tax Credit

First-time and seasoned home buyers received some good news recently.

On Nov. 6, 2009, the federal government extended a valuable tax break to home buyers under the Worker, Home ownership and Business Assistance Act of 2009.

The legislation was passed by the U.S. Congress as part of its plan to stimulate the U.S. housing market and address the economic challenges facing the country.

The act includes elements that extend time frames for home buyers and ease eligibility requirements.

It extends a tax credit of up to $8,000 to first-time home buyers.

It also extends a credit of up to $6,500 to current homeowners purchasing a new or existing home.

The credit applies to sales occurring between now and April 30, 2010, and covers home purchases completed by June 30, 2010.

The income-based qualification system allows for a $125,000 limit for a single taxpayer and a $225,000 limit for married couples filing joint returns.

The final tax credit is equal to 10% of the purchase price of the home being considered and it only applies to homes valued under $800,000 for qualified first-time home buyers.

But there's more good news.

The U.S. Department of Housing and Urban Development is allowing monetization of this tax credit, meaning that buyers with a Federal Housing Administration-insured mortgage can apply for and receive their anticipated tax credit immediately rather than wait until they file their income taxes to receive a refund.

This allows home buyers to apply the funds to closing costs. Home buyers can also use the funds to increase the amount that they put down on their home.

The tax credit applies to any home that is being used as a principal residence and includes detached homes, condominiums, townhouses and a wide variety of manufactured homes.