So what are these incentives? The $8,000 tax credit for first-time home buyers, part of The American Recovery and Reinvestment Act of 2009 is one that Congress passed early this year. It allows first-time buyers the opportunity to collect a tax credit of 10% or $8,000-- whichever is less-- of the purchase price of their home, provided the home buyer meets the following criteria:
• Purchase the house on or after January 1, 2009 and before December 1, 2009.
• Meet income requirements of $75,000 for individual taxpayers and $150,000 for married couples filing jointly (*note, there is a "phase-out" range for taxpayers with a modified adjusted gross income, please see website for details)
• Use the home as a principal residence
• Hasn’t owned a principal residence within the past three years
• Purchased the property from a non-family member.
What's great about this incentive is it doesn't have to be repaid unless the homeowner sells the house within three years or neglects to use it as a primary residence. And we're talking about real money; this is a tax credit not a tax deduction. What's the difference? If a buyer who qualifies for this credit has no tax liability to offset, he or she can receive a check for the full amount of the incentive. Who couldn't use $8,000 dollars in their pocket? Trouble is, this incentive is due to expire on December 1, and despite lobbying efforts by The National Association of Realtors, NAR, we still aren't certain congress will extend it. NAR estimates nationally that between 1.8 and 2 million first-time home buyers will take advantage of this credit. The IRS reported last week that this tax credit has already provided benefits to 1.4 million families. Unfortunately, we won't have an exact number for the Capital Region until next year, after income taxes are filed. But after evaluating my own business and talking with local real estate agents and mortgage brokers, I've come to the conclusion that locally, 40% or more of our business this year is coming from first-time home buyers.
The second incentive, this one issued by New York State, could save first-time buyers more than $30,000 over the life of their mortgage loan. The New York State Mortgage Credit Certificate issued by SONYMA enables qualified buyers to convert 20% of their annual mortgage interest into a direct income tax credit on their Federal tax return for each year of the life of their loan. For example, if a buyer pays $12,000 in mortgage interest in any one year, they can earn a tax credit for $2,400. The remaining 80% or $9,600 will continue to qualify as an itemized tax deduction. There are stipulations to the NYS MCC, and a tax professional should be consulted. The mortgage loan can not be issued by SONYMA but rather one of the authorized lenders listed by SONYMA. The loan must also be a conventional one with a fixed interest rate. In addition, applicants must meet SONYMA's first-time home buyer requirements, income limit requirements and purchase a home that doesn't exceed SONYMA's allowable purchase price (please see website for details; these requirements are broken down by county and Target Areas). In spite of that, the MCC is another fantastic opportunity for first-time buyers and one that is not due to expire any time soon. In addition, this incentive can be combined with the American Recovery and Reinvestment Act of 2009 tax credit, provided the home closes before December 1. In the Capital Region the transaction time for purchasing a home is about 45 to 60 days, which means first-time home buyers should have a contract written by October 1, if they want to take advantage of both incentives.
Right now these select buyers can have it all. With interest rates hovering around 5% for a 30 year fixed rate loan, unbelievable incentives backed by the government and a multitude of moderately priced houses on the market both nationally and across the Capital Region, these players are already the most valued players in the game right now.
(Thank you to Nick Lemme of Bank of America and Dave Stagnitti of Advantage Mortgage for their contribution. Click below on the link to my website, and you can find information about each of their services under "Neighborhood)
