- 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

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Goal Setting

Want to succeed? Then you need goals!

View Course »

TurboTax Articles

Amending Your Income Tax Return

What if you've sent in your income tax return for a previous year and then discover you made a mistake? You can make things right by filing an amended tax return. And, don't think an amended return will automatically cost you money; it's perfectly okay to change a return to capture a tax break you missed the first time around.

How to File Taxes with IRS Form 1099-MISC

If you receive tax form 1099-MISC for services you provide to a client as an independent contractor and the annual payments you receive total $400 or more, you'll need to file your taxes a little differently than a taxpayer who only receives regular employment income reported on a W-2.

What If I Did Not File My State Taxes?

At the time of this writing, the only states that do not charge a state income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. If you live or earn money in one of the other 41 states or the District of Columbia, you may need to file a state income tax return by April 15. It is a separate and independent requirement from filing your federal tax return and failure to file it on time may result in interest and penalty charges.

Add a Comment

*0 / 3000 Character Maximum