- Days left

Clock running down on first-time home buyer tax credit

new homesAccording to a news report by the National Association of Home Builders (NAHB), the clock is running down on the $8,000 tax credit for first-time home buyers. With less than four months to go, builders are urging qualified prospective buyers to start the sales process long before the Nov. 30 deadline.

Builders are also warning that faulty appraisals, completed using foreclosed properties as comparables for new homes, have been slowing down the sales process, creating hiccups in the financing stage that can often push the closing date much later than originally expected.

First-time buyers should also anticipate tighter lending standards that generally don't allow 100% financing, making buyers responsible for coming up with enough money prior to their purchase to meet required downpayment and closing costs.

The NAHB recommends young families considering becoming home owners start the process long before they put a bid on a new home. As part of that effort, builders can provide key educational information on the home buying process - including financing and closing - that buyers need to ensure that they occupy their new home in time to claim the tax credit.

For home buyers who need assistance with downpayment and closing costs, some state housing finance agencies are able to provide a short-term loan based on the home buyer's qualification for the federal tax credit.

Sixteen state housing finance agencies - in Colorado, Delaware, Florida, Idaho, Illinois, Kentucky, Massachusetts, Missouri, Nebraska, New Jersey, New Mexico, Ohio, Pennsylvania, Tennessee, Texas and Virginia - are participating in loan programs to help facilitate home sales for first-time home buyers in their area. Each state is different and qualifications and restrictions vary among the programs.

Search Homes for Sale

Builders say that home buyers should be warned, however, that there are organizations or individuals providing this service who are not legally permitted to do so. If the organization is a unit of state government, such as a state housing finance agency, it is safe to say that it is reputable. Otherwise, a home buyer should check with their local Better Business Bureau or through a state or local government's department of consumer affairs to ensure that the program they are working with is legitimate.

Although the tax credit has three requirements listed for home buyers to qualify - status as a first-time home buyer, time frame in which the home must be purchased, and income limits - it is sometimes not that simple. Specific situations - such as those involving the sale of a home between related individuals or prior ownership of a mobile home as a primary residence - may result in a buyer's disqualification from claiming the credit.

In a statement released last week, the Internal Revenue Service (IRS) warned taxpayers to beware of first-time home buyer tax credit fraud. Home buyers who may be unsure of their status on claiming the tax credit should seek professional advice from a certified public accountant or an enrolled agent licensed by the federal government.

Home buyers who may need additional information can find answers to frequently asked questions about the tax credit at www.federalhousingtaxcredit.com.

More: Avoiding First Time Buyer Mistakes | More First Time Tips

Tom Kraeutler is the AOL'S Home Improvement Editor and co-author of "My Home, My Money Pit: Your Guide to Every Home Improvement Adventure." He delivers home remodeling tips each week as host of The Money Pit, a nationally syndicated home improvement radio program.

Increase your money and finance knowledge from home

Introduction to Retirement Funds

Target date funds help you maintain a long term portfolio.

View Course »

What is Inflation?

Why do prices go up?

View Course »

TurboTax Articles

Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Add a Comment

*0 / 3000 Character Maximum