FIRST TIME HOMEBUYERS TAX CREDIT
Buying a first home is a big step. Fortunately, there are trained and experienced real estate agents to help you navigate through the process. In addition to the many benefits of homeownership, the Homebuyer Tax Credit and more affordable prices make now an especially opportune time to purchase.
What is the First-Time Homebuyer Tax Credit?
The First-Time Homebuyer Tax Credit is part of the American Recovery and Reinvestment Act of 2009. It authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before
April 30, 2010.
Am I Eligible?
First-time home buyers purchasing any kind of home - new or resale - are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before
April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
The credit can be applied to any new home, whether it’s newly built home or a resale, a townhouse, or a houseboat, and everything in between, and ownership of a vacation home or rental property does not disqualify a buyer.
What is the definition of a first-time home buyer?
The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
Are There Limitations on Income?
The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
Do You Have to Repay the Tax Credit?
No, it does not have to be repaid. Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
Why Is Now a Good Time to Buy?
Obviously, buying a home is a big step, and one of the most substantial investments you will make in your life. Fortunately trained professionals like realtors are willing to help you through the process. In addition to the benefits of homeownership, the First-Time Homebuyer Tax credit and substantially lower housing prices, will allow you buy “more house“ at a much lower price.
Additional information about the First-Time Home Buyer Tax Credit can be found at http://www.federalhousingtaxcredit.com