$8,000 First Time Home Buyer Federal Tax Credit

This is a general explanation of how the program works.

Here are the steps for taking advantage of the tax credit:

1. Homebuyer must be qualified based on income

     a. The maximum amount is available at an annual income of $75,000 Single or $150,000 Married Filing Joint

     b. The maximum income to get the tax credit is $95,000 Single or $170,000 Married Filing Joint

          i. As the income goes above $75,000/$150,000 the credit is reduced until the income reaches the maximum $95,000/$170,000, then they are no longer eligible.

     c. Cannot have owned a home in past 36 months from the date of the transaction closing

2. The tax credit is up to $8,000 at the maximum or 10% of the sales price.

     a. It will always be the lesser of the two.

     b. Remember above $75,000/$150,000 the tax credit amount diminishes.

3. You must find a government sponsored program (above is a link to those in place now) that offers to monetize the tax credit.

     a. This is basically some sort of bridge loan that gives the home buyer a loan against the tax credit in advance

     b. Some programs are second liens against the subject property and the CLTV can go up to 100% of acquisition cost.

     c. Other programs could be loans secured against the refund itself.

4. The home buyer then closes on their transaction.

5. The home buyers files an amended return using a CPA or tax preparer (called a 1040X) for their 2008 tax return or they could wait until they file their 2009 tax return.

     a. Filing an amended return on 2008 Federal Taxes will get them their tax credit refund the fastest.

When the check comes in from the IRS they pay the bridge loan in full.