Buyer credit in final stretch

By John Adams

For the AJC

From today, you have exactly 97 days to find a house, negotiate with the seller, and get it under contract. If you can do that by midnight on Friday, April 30, you’ll likely qualify to pick up a check from the government for as much as $8,000.

But after that moment, don’t look for an extension of the program — it probably won’t happen.

The First Time Home Buyer Tax Credit has been a success. Sales of existing homes have increased almost steadily since last April. And the National Association of Realtors reported recently that first-time home buyers accounted for about 30 percent of all sales last year.

The IRS defines first-time buyers as anyone who has not owned a principal residence in the last three years.

The tax credit is for 10 percent of the purchase price, up to a maximum of $8,000, and does not have to be paid back. The credit begins to phase out for buyers with an income of $125,000 for singles and $225,000 for joint filers.

The tax credit was extended and expanded to include more Americans in November. At the same time, a Repeat Home Buyers Tax Credit was initiated to encourage existing homeowners to move and purchase another house.

Again, there are income limits, and the home being purchased must cost less than $800,000.

And once again, the credit is for 10 percent of the purchase price, up to a limit of $6,500. “Repeat Buyer” is defined as anyone who has owned their own principal residence for at least 5 of the past 8 years.

An often overlooked benefit of a tax credit is that the payment is not considered income, so it is tax-free. If you qualify, you get the full benefit of each and every dollar.

But the fun is set to end April 30 at the stroke of midnight. Any buyers whose contracts are not binding by then will be ineligible to participate.

Don’t look for another extension. With deficits at an all-time high and the real estate market mounting at least the beginnings of a recovery, politicians are unlikely to continue what can only be described as a substantial subsidy for the American dream.

The $8,000 First Time Homebuyer Tax Credit and the $6,500 Repeat Homebuyer Tax Credit are both set to expire at the end of April, although if you have a binding contract by that date, you can have until the end of June to get it closed.

My advice is to take the money and run.

John Adams is an author, broadcaster and investor. He answers real estate questions on radio station WGKA (920am) every Saturday at noon. For more real estate information or to make a comment, visit www.money99.com.