Time is running out to take advantage of the first-time homebuyer tax credit.
To qualify you must close on your purchase before Dec. 1.
If you don’t have a sales contract in hand, and mortgage application in the works, by mid-October you’ll be racing to meet that deadline.
The homebuyer’s tax credit has been a popular part of the economic stimulus bill Congress passed last winter — the American Recovery and Reinvestment Act of 2009.
It allows most buyers who haven’t owned a house in at least three years to claim a credit of 10% of a home’s purchase price, up to $8,000.
You can apply the credit to your 2009 return, or an amended 2008 return, even if you don’t itemize deductions.
Unlike a deduction, which reduces the gross income used to calculate how much you owe, a credit comes right off the bottom line of your tax bill.
So while a $1 deduction might cut your taxes by 25 or 30 cents, depending on your tax bracket, a $1 credit will reduce what you owe the government by a full $1.
If you don’t owe any tax or if the credit comes out to be more than the tax you owe, you’ll be paid the difference.
Unlike the previous, $7,500 first-time buyers tax credit created by the Housing and Economic Recovery Act of 2008, none of this money must be paid back.
Nearly 315,000 homebuyers have already claimed the tax credit using an amended 2008 tax return, according to a recent Treasury Department report.
More than 42,000 of those claims came from California. Another 29,000 were from Florida and Texas.