Cape Coral Florida's Real Estate Guide

As part of President Obama's recently passed economic stimulus plan, first time buyers have been extended a tax credit of up to $8,000 for homes purchased this year. Want to know if you qualify? Read on to find out!

This tax credit applies to home purchases made between January 1, 2009 and November 30, 2009. For tax purposes, the purchase date is considered to be the date the closing takes place and the property title is transferred to the home owner. Any type of home is eligible for the tax credit but you must be considered a "first-time home buyer". This includes single-family detached homes, attached homes such as townhouses and condominiums, manufactured homes and houseboats.

As defined by law, a first-time home buyer is a buyer who has not owned a principal residence within the past 3 years. That being said, there are a few things that buyers should know. First, married taxpayers should know that they cannot qualify for this tax credit if their spouse has owned a principal residence within the past 3 years. Second, owning a vacation home or a rental property that has not been used as a principal residence is not grounds for disqualification for this new credit.

The amount of the credit is equal to 10% of the home's purchase price up to a maximum of $8,000. To qualify for the full credit, a buyer must have a modified adjusted gross income (MAGI) of less than $75,000 if single or $150,000 if married and filing a joint tax return. Buyers may qualify for a partial credit if have a MAGI of less than $95,000 if single or $170,000 if married. If a buyer has a MAGI above these amounts, they do not qualify for this tax credit.

So what is modified adjusted gross income? MAGI is defined by the IRS. To find it, a buyer must first determine their adjusted gross income or AGI. AGI is total income for a year minus certain deductions also known as adjustments or above-the-line deductions, but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains. To calculate your modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

Do you meet these basic requirements? If so, now is the time to buy! In addition to this tax credit, you can obtain a mortgage these days at historical lows. This combination truly makes a home purchase a very worthwhile investment. If you are a first time buyer interested in purchasing a home in Cape Coral, contact me today to start the journey toward home ownership!