Recently, WRGB, CBS6 News asked if I’d be interested in becoming a member of their Answers Team, and be their representative for local real estate. This team is comprised of area business leaders who represent: banking, money management, credit counseling, career development, financial planning, mortgages, taxes, and government relations, to name a few. I was recommended by a past client and friend who is a reporter and fill-in anchor for the station.
The Answers Team convenes every Wednesday from 5:00 pm to 7:00 pm when we participate in a phone bank. Each week, CBS6 viewers either email or call in with real estate, financial or business related questions. The show’s producers screen these inquiries and direct callers to the appropriate person. In addition, producers often request an exclusive interview to talk about relevant issues within the various industries. I gratefully accepted this opportunity, and filled the role in September.
Last week, approximately 80% of all the phone calls I received were inquiries regarding the $8,000 tax credit for first-time home buyers or the New York State Mortgage Credit Certificate (NYS MCC) program. There seems to be alot of confusion about the definition of a “first-time home buyer”, the difference between the two programs, the time frame a home needs to close to be able to qualify, what types of structures are acceptable, as well as what buyers need to do to qualify for both deals.
Because the $8,000 tax credit is set to expire on December 1, first-time home buyers want to make sure they qualify for either one or both of the tax credits. Although I covered both incentives in a recent blog post Who’s the Winner, I think it’s worthwhile to address some of these questions.
Q: What is considered a first-time home buyer?
A: A first-time home buyer is a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, this rule tests the history of both the buyer and spouse. If either have owned or co-owned a principal residence within the past three years, they do not qualify.
Q: What are some of the differences between the two programs?
A: Overall both incentives are a great opportunity for first-time home buyers to save money; however, the NYS MCC is much more restrictive than the $8,000 tax credit and requires more effort from the buyer to obtain. Let’s start with the basics. The $8,000 tax credit can earn qualified buyers a tax credit for 10% of the purchase price of their home; however, that amount can’t exceed $8,000. This is a one-time credit and can be claimed on an amended 2008 Federal tax return or the 2009 return. On the other hand, the NYS MCC is a certificate that allows the buyer to convert 20% of their annual mortgage interest into a tax credit for the life of the loan, potentially saving first-time home buyers more than $30,000. The pitfall is the MCC requires buyers to apply for the certificate through an approved list of lenders, the mortgage loan must be a fixed interest rate, the mortgage loan can not be issued by SONYMA, the income limitations are stricter than on the $8,000 tax credit and there are also purchase price limits. In addition, the tax credit each year can’t exceed the borrower’s federal income tax liability. In other words, you wouldn’t be issued a check for the difference. On the bright side, the unused portion of the credit would be carried forward for up to three years and applied to future liability. Also, the NYS MCC has a one-time application fee associated with it. A house priced equal to or less than $100,000 commands a $250 application fee and a purchase over $100,000 requires $500. Both must be paid at closing by certified check.
Q: When do I need to close to qualify for the $8,000 tax credit and how can I qualify for both of these incentives?
A: First, the $8,000 tax credit is due to expire on December 1, of this year. A first-time home buyer is eligible for this credit if they close on a home on or after January 1, 2009 but before Dec 1, 2009. To qualify for both incentives, the home buyer must close on or after September 2, but before December 1. In addition, they must meet all guidelines issued by SONYMA (see website) including using an approved lender, meeting purchase price and income requirements, as well as applying for the certificate before mortgage approval.
Q: What types of homes are covered under both incentives?
A: Existing or newly constructed one-family homes including townhomes, condos and coops. According to the IRS, mobile homes are covered under the $8,000 tax credit even if the land is leased. The MCC doesn’t include homes that are not permanently attached to land; nor does it include property that exceeds five acres. The MCC does allow for the purchase of two, three and four-family homes provide they meet the SONYMA guidelines.
The above questions are the bulk of what I received last week during my Answers Team session. If you’re interested in learning more, I’ve created a report that compares the two incentives which can be obtained from my website http://www.lisachampagne.com/. I urge all first-time home buyers to speak with their lender and a tax expert regarding these programs.
