One of the questions often asked is about the First-Time Homebuyer tax credit. What is it? Is it still available? And, of course, what can would-be buyers do to get their hands on some targeted assistance?
Unfortunately, the answer is not quite as cut and dry as some would hope. To clear up the confusion, this guide on the subject explains more about what the tax credit is, who’s still eligible and what you can do to find similar benefits in the event that you don’t qualify.
What Was The First-Time Homebuyer Tax Credit?
The First-Time Homebuyer Credit was a tax provision made under the Housing Economic and Recovery Act (HERA) in 2008. After the economic downturn the previous year, the Obama Administration introduced HERA in an attempt to restore confidence in the mortgage industry and particularly in lending institutions.
In addition to allowing the Federal Housing Administration (FHA) to guarantee new loans for current borrowers who were suffering financially under subprime mortgages, HERA sought to encourage new homeowners to enter the market by offering them a substantial tax credit for the year in which they purchased their home.
Depending on how individuals structured their taxes, the first-time homebuyer tax credit would either reduce their bill or increase their refund up to $7,500. However, it’s important to note that those who claimed the credit are subject to different stipulations and repayment structures, depending on the year in which they purchased.
Is The Tax Credit Still Around?
The short answer is, that depends. Since the tax officially expired on April 30, 2010, ultimately still allowing homeowners to claim it as long as their closing occurred on or before September 30, 2010, today’s first-time buyers should not expect to see this particular benefit. If, however, you did purchase a home for the first time between 2008 and 2010 and you’ve never claimed the credit, you may still be eligible.
If you believe that you meet the criteria for the credit and would like to pursue it, your best bet is to contact a tax professional. Since its stipulations will vary depending on when you settled, he or she can help educate you on the specifics of your credit and help you to file the appropriate paperwork.
So, what does this mean for those of you just entering the market now? Fear not — just because the First-Time Homebuyer tax credit has expired, that doesn’t mean there aren’t any incentives available for those looking purchase their first property. Far from it, in fact. These days, however, first-time homebuyer incentives are simply offered on state and local levels instead of a national one.
How Can I Find Current Incentives?
The first step to figuring out if you’re eligible for any assistance is to do your research. I recommend starting by searching for first-time homebuyer programs in the state you are purchasing in. In 2018, tax credits — beyond the Mortgage Interest Credit — aren’t really an option. Rather, you’ll be more likely to see help offered through matching programs or down payment and closing cost assistance.
To get started, there is no better place to search than your local .gov site. Another source of helpful explanations is the U.S. Department of Housing and Urban Development, or HUD.gov. Rural property buyers may qualify for assistance from the U.S. Department of Agriculture, and veterans may have unique options available from the Department of Veterans Affairs. Spend time on local and federal government websites to identify options afforded to you by your unique circumstances.
You’ll want to take some time research these programs thoroughly. Since they’re being offered by a variety sources, the qualifying and eligibility requirements will likely vary greatly. In particular, you may face stipulations regarding things like the homes location, your credit score or a repayment schedule. Be sure to read over each one carefully to confirm that you are a good candidate.
Once you have a particular program in mind, you should look for a participating lender. Since these assistance programs often come along with a fair amount of red tape, it’s in your best interest to work with someone who is familiar with the application progress. As you interview lenders, make sure to ask about their qualifications regarding that specific program, as well as if they have additional ideas on ways that you can save.