Buying a $70k foreclosure. Closing is in two weeks. I qualify for FTHB credit. I was not planning on setting up escrow for taxes. What do I have to do to guarantee I will get the $7k check by summer? I will be a little “Cash Light” after closing and rehab. I need that money sooner rather than later.
It’s a tax credit. It is not a tax refund. You apply it to the taxes you owe. You may or may not end up with a check.
So if my property taxes are $3200 per year…what?
Your property taxes are not effecting directly the tax credit. Essentially, when you do your return, if you have a tax that is owed (even if you have prepaid some taxes through withholding) you take your entire tax bill and there is a dollar for dollar ‘credit’ towards that tax bill. This is not a check that Fed Gov’t writes to you for buying a home! It is just as though the credit went to pay your income tax bill up to the limits of that credit!
I have found that if you purchase a tax code book, albeit very boring and lengthy, and you actually read and study this book, highlight, underline, bookmark those sections that apply to you and your particular circumstances, you would be most enlightened and not need these surprises such as your expectation of getting a check from the gov’t when they offer a credit!
Hope this helps.
Rob
Milwaukee,
When you submit your 2009 federal income tax return, you also fill out Form 5405 and submit that with your tax return. You will also need to attach a copy of the HUD-1 (signed by both the seller and the buyer)as proof of your purchase and entitlement to the tax credit.
When you get the “check” from the government depends upon when you file your tax return. Since you have to mail your tax return, plan on getting your refund check about eight weeks after the IRS accepts your return.
The first time homebuyer tax credit will be added to your refund or will offset income taxes you might owe.
Your property tax bill for the year will probably be collected from you at settlement. The first time homebuyer tax credit is not a credit against property taxes.
You have to complete settlement before you can apply for the refund on your federal income tax return.