Last Minute Tax Credit Tips

The 2010 homebuyer tax credit is worth 10% of the home’s sale price: up to $8,000 for buyers who haven’t owned a home in the previous 3 years and up to $6,500 for buyers who have owned and occupied a principal residence for at least 5 consecutive years during the 8 year period that ends on the day the new home is purchased.

The tax credit is set to expire in June, so time is of the essence for any last-minute buyers out there. In order to receive the credit, buyers must enter into a binding contract to purchase the home on or before April 30, 2010. The term “binding contract” is not specifically defined in the homebuyer tax credit law and therefore may be subject to interpretation. Generally, the term refers to an agreement that’s signed by both parties and has a deposit in escrow. The purchase must close within 60 days after the binding contract deadline. In this context, that means June 30, not June 29, according to the Internal Revenue Service.

Take note if you work for the government, as certain U.S. military, foreign service and intelligence service personnel have an extra year to claim the homebuyer tax credit. These buyers must enter into a binding contact on or before April 30, 2011, and close on or before June 30, 2011.

If you are worried about missing the deadline, talk to your REALTOR as contract contingencies might allow buyers some breathing room to take care of large issues such as financing, inspections and the sale of their current home. It is, however, very wise to have your financing already lined up so that you don’t waste any valuable time during the process. You should also keep in mind that you might need extra time in case the mortgage lender requires a second appraisal (fairly common in today’s economy) which can delay final loan approval.

The most important thing you can do to ensure you don’t miss the deadline and everything goes smoothly, is talk to your REALTOR who is experienced and knowledgeable, and who’s main concern is protecting your interests.

Tina Fountain Realtors, an Atlanta Real Estate company serving the entire metro Atlanta area including Marietta Real Estate and Vinings Real Estate. We can be reached at 404-842-1555.