Federal Tax Credit for First Time Home Buyers

Bulletin!!  It's official (November 7) - the 2009 tax credit has not only been extended but expanded to include existing and recent home owners!!!

The $8,000 first-time homebuyer tax credit is extended for contracts signed before May 1, 2010 that close before July 1, 2010.  The new legislation also increases the income limit for couples with income up to $225,000.  Buyers who have owned a home five of the last eight years are eligible for a $6,500 maximum tax credit on homes not to exceed $800,000.  Tax credits are eligible for primary residences, not second homes or investment properties.  These tax credits are a dollar for dollar offset to your federal income tax liability.  Call us for more information at 704-728-9997 or 1-866-393-2052.
 
During 2008 and 2009, the Congress passed two other tax credits for first time home buyers with such buyers classified as purchasers who have NOT owned a home in the previous 3 years prior to purchase. One was a $7,500 credit (2008) paid back over 15 years via your tax return and the other an outright tax credit (2009) of $8,000 off setting your taxes due dollar for dollar, in essence, a tax refund for purchasing a home.

Below is a summary of both tax credits that can still affect your 2008 tax return even at this date, April 10th, 2009, because you can amend your 2008 tax return for either credit. this is all contingent on your pruchase date.

• Tax credit is for first time home buyers who have not owned during the three years prior to closing on the new purchase.  If married, both spouses must not have been a primary homeowner during the period.  Unmarried buyers may allocate credit to the one who qualifies as a first time home buyer. For example, a parent and a son or daughter. Ownership of a vacation home or rental property not used as a principal residence doesn't disqualify a buyer as a first time home buyer. Example, a buyer may have been renting for more than three years.
  
  
• The home must be a principal residence.  It can not be a vacation home or second home.
  
  
• Home must be purchased on or after January 1, 2009 and before Decenber 1, 2009.
  
  
• The tax credit does not have to be repaid.
  
  
• The tax credit is equal to 10% of the home's purchase up to a maximum of $8,000.  In other words, the credit peaks out at a purchase price of $80,000.  You may buy a home more than $80,000 but the credit stops at $80,000.
  
  
• Single taxpayers with annual income up to $75,000 and married couples with income up to $150,000 qualify for the full credit.  The tax credit is phased out on the first $20,000 beyond these amounts to zero at $95,000 and $170,000 respectively.  Income is based on MAGI or Modified Adjusted Gross Income.  This is the amount at the bottom on page 1 on the 1040 and 1040a forms and line 4 on the 1040EZ form.
  
  
• Home buyers must use the home as their principal residence for three years following the closing date. Failure to live in the home for the three years will result in full recapture of the tax credit.
  
  
• Homes that qualify are single family detached, condos, townhomes, manufactured home, mobile homes, or houseboats.
  
  
• The tax credit can exceed your tax liability, in such case, you will receive a refund.  For example, if you owe $3,000 and your tax credit exceeds $3,000, then you will receive a tax refund on the balance of your tax credit.
  
  
• Buyers may elect to apply their 2009 purchase to their 2008 return by amending the 2008 return even if it has been submitted.  In this case you will not have to wait until next year's return for the tax credit.  Buyers who do not elect to apply the tax credit to the prior year can reduce their withholding amount on their W-4 or reduce quarterly estimated tax paymants on the IRS 919 form.
  
  
• See the National Association of Homebuilders website for more information.

• Tax credit is for first time home buyers who have not owned during the three years prior to closing on the new purchase.  If married, both spouses must not have been a principal homeowner during the period.  Unmarried buyers may allocate credit to the one who qualifies as a first time home buyer. For example, a parent and a son or daughter. Ownership of a vacation home or rental property not used as a principal residence doesn't disqualify a buyer as a first time home buyer. Example, a buyer may have been renting for more than three years.
  
  
• The home must be a principal residence.  It can not be a vacation home or second home.
  
  
• Home must be purchased on or after April 9, 2008 and before January 1, 2009.
  
  
• The tax credit must be repaid over a 15 year period beginning two years after the tax  year claimed or when the home is sold if there is sufficient capital gain from the sale.  That's right, if your home doesn't appreciate enough to cover the remaining balance of the tax credit, it is forgiven - it does not have to be repaid. However, if there is sufficient capital gain then all the remaining balance is due.
  
  
• The tax credit is equal to 10% of the home's purchase price up to a maximum of $7,500.  In other words, the credit peaks out at a purchase price of $75,000. You may buy a home more than $75,000 but the credit stops at $75,000.
  
  
• Single taxpayers with annual income up to $75,000 and married couples with income up to $150,000 qualify for the full credit.  The tax credit is phased out on the first $20,000 beyond these amounts to zero at $95,000 and $170,000 respectively.  Income is based on MAGI or Modified Adjusted Gross Income.  This is the amount at the bottom on page 1 on the 1040 and 1040a forms and line 4 on the 1040EZ form.
  
  
• Homes that qualify are single family detached, condos, townhomes, manufactured home, mobile homes, or houseboats.
  
  
• The tax credit can exceed your tax liability, in such case, you will receive a refund.  For example, if you owe $3,000 and your tax credit exceeds $3,000, then you will receive a tax refund on the balance of your tax credit.
  
  
• See the National Association of Homebuilders website for more information.