$8,000 Homebuyer's Credit for first-time and repeat homebuyers
Looking for some economic sunshine? Buy a first home and earn a tax credit of up to $8,000 – and the paperwork’s gotten easier. The First-Time Homebuyer’s Credit has been extended to purchases under contract by April 30, 2010 and closed by June 30, 2010. For members of the armed forces serving at least 90 days outside the United States, the credit can be used until June 30, 2011.
For purchases made after November 7, 2009, the income limits for eligibility have also been expanded. The credit does not start to phase out until Modified Adjusted Gross Income exceeds $125,000 for single taxpayers and $225,000 for married couples filing jointly. That wide range helps more people qualify for this credit.
Further, the credit can be claimed by homeowners buying a new principal residence if they have lived in their current home for at least five of the last eight years. For repeat purchasers, the credit is capped at $6,500.
Of course, there are limits. The right to use the credit is phased out as Adjusted Gross Income (AGI) rises from $75,000 to $95,000 on a single return, or $150,000 to $170,000 on a joint return. For example, if you show an AGI of $160,000 on your 2009 IRS return, that’s halfway up the phase-out range, qualifying you for half of the $8,000 credit -- $4,000. Still not bad!
Under both the old and the new versions of the law, you can treat the purchase as having taken place on December 31 of the prior year if you want to claim the credit against that year’s taxes. You also can file an amended return for the prior year, if you’ve already filed, so that you can receive the credit immediately rather than waiting to file your 2009 tax return in 2010.
Most qualifying taxpayers will claim the credit of $8,000 for purchases through May 1, 2010 on their tax returns using Form 5405. Your Team Beaufort experts will gladly help you with this and any supporting documentation you may need.
If the home is sold within three years of purchase, the entire amount of credit is recaptured on sale.
This measure can help to significantly lower housing inventory, bring stability to home values and move the country closer to economic recovery. Many industry experts have said that the tax credit for first time homebuyers could result in up to 300,000 additional home purchases each year. The following chart provides more information:
FEATURE
FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT:
EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
Amount of Credit
The amount of the homebuyer federal income tax credit is the lesser of 10% of the cost of the home bought or $8,000.
Eligible Property
Any single-family residence (including a condo, co-op, or townhouse) may be an eligible property under the homebuyer income tax credit, provided it will be used as the homebuyer’s principal residence.
Refundable
This homebuyer income tax credit reduces income tax liability. The $8,000 tax credit is a clean refundable credit, unlike the one that was passed last summer, which required a repayment. If you qualify as a first-time buyer (i.e., haven't been a homeowner in the past 3 years), then you can claim the $8,000 to reduce your tax burden. If the $8,000 is greater than the tax you owe, then you will get a refund check for the difference. Example: you owe $2,000 in taxes on April 15, 2010. But if you bought a home before the stimulus expiration on Dec. 1, 2009, then you will get a tax refund check for $6,000 from the IRS.*
Income Limit
In order to be eligible for the homebuyer income tax credit in full, the homebuyer can have an annual adjusted gross income of no more than $75,000 ($150,000 on a joint return).A homebuyer with an annual adjusted gross income above that level and up to $95,000 ($170,000 on a joint return) is eligible for a reduced tax credit.
First-time Homebuyer Only
The homebuyer income tax credit is designed for first-time homebuyers, which means the homebuyer (and/or the homebuyer’s spouse) can not have owned a principal residence in the 3 years prior to purchase of the eligible property.
Revenue Bond Financing
A homebuyer who utilizes revenue bond financing may be eligible for the homebuyer income tax credit.
Repayment
There is no repayment of the homebuyer income tax credit by the homebuyer.
Recapture
However, if the eligible property is resold within three years of purchase, the entire amount of homebuyer income tax credit is recaptured on the sale.
Effective Date
The First-Time Homebuyer Federal Income Tax Credit is effective for purchases on or after January 1, 2009 and before December 1, 2009. This guide reflects a modification from the First-Time Homebuyer Federal Income Tax Credit, which remains in effect for homes purchased by eligible homebuyers between April 9, 2008 and Dec. 31, 2008.
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