The clock is ticking for people who want to take advantage of an $8,000 first-time homebuyer tax credit because all sales must close by the Nov. 30 deadline.
The American Recovery and Reinvestment Act of 2009 authorized a tax credit of up to $8,000 for qualified first-time homebuyers purchasing a principal residence between Jan. 1 and Dec. 1 of this year. Eligible buyers include those who haven't owned a home in the past three years and who plan to live in the home for 36 months after closing.
The maximum credit is either 10 percent of the purchase price up to $8,000 for a single taxpayer or married couple filing jointly, or $4,000 for married people filing separately.
The income limit for single taxpayers is $75,000, while the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return.
"The American Recovery and Reinvestment Act ... extended the first-time homebuyer credit into the current year and expanded it from the old amount of $7,500 as the maximum benefit," said Bill Brunson, Internal Revenue Service spokesman in Phoenix. "That in essence was an interest-free loan that you had 15 years to pay back. This is an $8,000 credit, and you're not required to pay that item back as long as you reside in that home - that's your principal, primary home - for the next 36 months."
Taxpayers can claim the credit on their 2008 or 2009 income tax returns, even if they've already filed their 2008 returns, he said. IRS Form 1040X can be used to amend your 2008 return, he said.
"Now is a good time to start looking for a new home or to start to close on the paperwork if you qualify for the credit," Brunson said.
Closing is when all parties sign the papers officially finalizing the deal, and ownership of the property is transferred to the buyer.
Jay Butler, director of Arizona State University's Realty Studies Department, said the credit has been helpful for homebuilders that have been struggling since the downturn in the market. Extending the tax credit beyond Nov. 30 would require congressional action.
"There is talk about renewing it because they feel it has been an important element, especially in the new home market," he said. "Actually, what they've been talking about is taking it to $15,000 and dropping the first-time homebuyer thing. But with today's environment, and with health care and other things, it's going to be rough to get this on the front burner."
With the deadline three months away, the credit can't be claimed for houses that aren't already under construction, Butler said. Houses cannot be closed on until after construction is completed and the house is ready for occupancy.
"Most people are estimating (it takes) roughly 30 days to close," he said. "You can do it in a shorter period of time. Many of the builders have captured lenders so it's a little easier to do the paperwork and the financing because you're not only doing it for the good of the buyer, but the good of the company."
Tempe-based Fulton Homes has seen a big increase in sales from the tax credit, said Dennis Webb, vice president of operations. Paradise at Ironwood Crossing in Queen Creek is the company's best-selling subdivision in the Valley.
"We have a bunch of homes that are under construction now and started several weeks ago, and they will be completed by that date," he said. "The buyers can still take advantage of the tax credit and select options to personalize their home."
Fulton Homes would like to see the tax credit extended beyond Nov. 30.
"It could slow things down if they don't extend it," Webb said. "We're just coming out of this cycle, and it's pretty fragile right now, and a lot of people worry that if they don't extend it, it could hurt the market a little bit for the time being. I don't think they want to do that because the housing recovery is so important to the country."
The tax credit has been a "great incentive" for people to take a second look if they were undecided about buying a new home, said Jacque Petroulakis, Southwest spokeswoman for Pulte Homes, the Communities of Del Webb and Centex, which has numerous communities in the East Valley.
"Definitely it's something that we would love to see extended," she said. "We are making the most of the incentive by making sure we have homes available that people can purchase and close within the guidelines now ... but definitely as the weeks go by, those opportunities become slimmer and slimmer."