Deadline looms for first-time buyers

By John Adams

For the AJC

Are you a first-time home buyer? If so, it’s time to sit up and take notice.

If you have been sitting on the proverbial home-buying fence, you have just over 60 days to find what you want, get it under contract, obtain financing and get closed.

If you can pull that off, you may still qualify to pick up a tax-free check for $8,000. But the Federal First Time Homebuyer Tax Credit is set to expire at midnight Nov. 30, and closings after that date won’t qualify.

This tax credit:

● is available only to those buying their principal residence.

● reduces your tax bill (or increases your refund) dollar for dollar.

Here are the questions I am most often asked:

Q: Are there limits on purchase price or location?

A: There is no limit on price, but the credit is 10 percent of the purchase price, up to a maximum of $8,000. The purchased home must be located inside the United States.

Q: Can I buy a house from my parents?

A: No. Homes purchased from close relatives are excluded from the program. But steprelatives are not considered close relatives, so you could buy a home from a stepparent.

Q: Can I buy a home now, rent it out for a few months, then move in and still qualify?

A: No, the sale must close no later than Nov. 30, and it is expected that you would occupy the house immediately as your principal residence.

Q: I heard that the government payout on the Cash for Clunkers program was going to be taxed. Is this tax credit treated the same way?

A: No. Tax credits are not considered as taxable income. Even if you have no liability for income taxes, you can still receive a check for the amount of your credit.

Q: Can I buy a new house and still get the credit?

A: Yes. New construction qualifies.

Q: How can I know for sure whether I qualify?

A: Visit IRS.gov and search on “homebuyer” for detailed information. Your tax preparer is best qualified to explain the rules.

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