Right now there is a little over a month left until the expiration of the $8,000 tax credit for home buyers and of course home buyers getting VA Loans to qualify. And keep in mind that you must close by Nov 31st to get the tax credit. That means you probably have to be in contract to buy probably in roughly two weeks to make sure you qualify.
Here’s a Q&A review for you VA loan buyers to see if you qualify for the tax credit:
Q: Who is eligible to claim the $8,000 tax credit?
A: First Time Home Buyers of any purchasing any kind of home- new or resale.
Q: What is the definition of a FTHB?
A: The law defines “first-time homebuyer” as a buyer whom has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law test homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past 3 years but your spouse has owned a principal residence, neither you nor your spouse qualified for the first time home buyer tax credit.
Q: Are there income limits to determine who is eligible to take the tax credit?
A: Yes. Homebuyers who file their taxes as single or head-of-household taxpayers can claim the credit if their modified adjusted gross income (MAGI) is less than $75,000. For married taxpayers filing a joint return, the MAGI limit is $150,000. The limit is based on the buyer’s modified adjusted gross income for the year that the house is purchased, except for certain purchases in 2009. Read below for other selling advantages on this one. For the definition of MAGI see the IRS.Gov website.
Q: I heard that the tax credit is refundable. What does that mean?
A: The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for the portion or even the entire amount of the refundable tax credit. For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax LIABILITY of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the tax payer qualified for the $8,000 home buyer tax credit. As a result, the tax payer would receive a check for $7,000. ($8,000 minus the $1,000 owed.)
Q: What is the difference between a tax credit and a tax deduction?
A: A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means a taxpayer whom owes $7,500 in income taxes ands who receives a $8,000 tax credit would owe nothing to the IRS.
Q: For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on which year my credit amount is the largest?
A: YES. If the applicable income phase-out would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit. So, the borrower can amend 2008 returns if already filed, and receive the credit now!
Don’t hesitate to give me a call if you have any questions or need to get approved for a VA Loan.
Warm Regards,
Rob Chomentowski
Sr. Loan Officer (and VA Loan specialist)
858-922-7899
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