There is a new federal scheme that gives tax credit to those who buy a house this year. Home buyers, who have not owned a house for the last three years, will get relief of 10% of the sale price of the house or $8,000, whichever is lower.
Those who have not owned or resided in any principal residence for at least five consecutive years during eight years before the purchase of the new house, will get a benefit of up to $6,500 under the tax credit scheme.
However, the deadline for this scheme is approaching fast and you need to act quickly, if you want to avail of the benefit. You can only get the benefit if you have signed a legally binding contract for purchasing a house by 30th April, 2010. The contract should be legally enforceable and you should have fulfilled all major formalities.
After signing the contract, you must purchase the property within 60 days of the deadline. The Internal Revenue Service (IRS) has clarified that the last day for purchasing the property is 30th June 2010.
Leeway has been given for employees of specific military, foreign and intelligence services of the country who wish to get home buyer tax credit but cannot do so because of their duties. They have been given time till 2011 for entering into the contract and for buying the property.
Due to a rush for buying houses, it is important that you talk to your real estate agent quickly and give details about the kind of house you need. You might have to put in extra effort for inspecting and deciding on the property. Some buyers choose to include a tax-credit contingency clause in the contract, which will ensure that they need not buy the house if the deadlines are not met.
You should secure the mortgage beforehand as problems in credit history, demand for second appraisals or request for records of tax returns that have to be gotten from IRS can cause delays. You should be wary of short sales – they can cause delays because of the involvement of the lender in selling the house at value lower than that of the mortgage loan.
Therefore, in order to get home buyer tax benefit you should act quickly and ensure that you take care of all these aspects that can cause delays. You can fill Form 5405 for claiming the credit and keep a contingent option for the eventuality that you don’t get tax credit because of delays.