Incentive helps first-time buyers

By John Adams

For the AJC

Plenty of Americans have been sitting on the sidelines waiting to see if and when the recession would end and, more importantly, when housing prices would finally hit bottom. Their plan is to locate the perfect combination of low price, low interest rate and desperate seller.

They may have waited long enough.

Many market watchers believe that 30-year fixed rates, already in the below 5 percent range, won't get any lower this cycle. In addition, prices are extremely attractive. And finally, there are enough highly motivated sellers to make a buyer's efforts fruitful.

There's one more compelling factor urging buyers on to action —- the Federal Housing Credit for First-Time Home Buyers, and it's proving to be a powerful motivator in our upcoming summer selling season. I've had lots of questions about the credit, so here is the program in a nutshell. First-time home buyers may be able to take advantage of a tax credit for homes purchased this year. The tax credit:

Applies only to homes closed between April 8 and Dec. 1, 2009.

Is available only to those purchasing their principal residence.

Reduces your tax bill (or increases your refund) dollar for dollar.

For the purposes of this credit, a first-time homebuyer is one who has not owned a principal residence during the past three years.

Ownership of vacation property or rental homes will not disqualify you.

If you qualify for the credit, you can claim it against your 2008 tax return. If you have already filed, you may file an amended return or wait until April 15, 2010. The credit does not have to be repaid unless you move out of your new residence during the three years following purchase, so plan on staying put.

The credit is 10 percent of your home's purchase price, up to a maximum credit of $8,000.

There are some limitations:

The credit begins to phase out for single taxpayers whose adjusted gross income is above $75,000 and is eliminated altogether at $95,000 or higher. Married filers phase out between $150,000 and $170,000.

You may not purchase your home from a close relative.

John Adams is a broker and investor. For more real estate information or to make a comment, visit www.money99.com.