Posted by: natewolf | March 6, 2009

$8000 Federal Tax Credit for First Time Home Buyers

A Sweet Deal for First Time Home Buyers:

The ins-and-outs of the $8,000 First-Time Homebuyer Tax Credit

If you are – like many Americans – trying to figure out the best time to make your first home purchase, then you may want to take a closer look at the first-time homebuyer tax credit included in the American Recovery and Reinvestment Act, which was signed into action by President Barack Obama on February 17, 2009.

The 2009 homebuyer credit DOES NOT require repayment. Repayment of the credit is only required if the owner sells the property within three years of purchase.

Credit Amount

While the credit is equivalent to 10 percent of the purchase price of the home, the 2009 credit increases the limit of the credit from $7,500 to $8,000.

1. Qualifying for the homebuyer credit

The credit is for first-time homebuyers only. As it relates to this credit, a first-time homebuyer is defined as any taxpayer who has not owned a principal (or main) residence for a period of three years prior to the home purchase. The first-time purchase must be of a principal residence.

2. Income limitations

The legislation does limit availability of the first-time homebuyer credit based on modified adjusted gross income (MAGI). Single filers with MAGI of $75,000 or less and married couples with MAGI of $150,000 or less are eligible for the full $8,000 credit. Those individuals or couples with MAGI above these limits may be available for a reduced credit on a phase-out basis.

3. Purchase window

The 2009 first-time homebuyer tax credit is retroactive to January 1, 2009 and covers purchases through November 30th, 2009.

4. Refundable credit

The tax credit reduces your final tax liability and you will be refunded whatever portion, if any, of the credit that remains after applying the credit to taxes you owe for that year. For example, let’s say you qualify for the full $8,000 homebuyer credit and your total tax liability (after withholding) is $2,000. Your tax liability will be zero, and you will receive a refund for the remaining $6,000.

5. Claiming the credit

Claiming the credit is actually very simple. To take advantage of the first-time homebuyer credit, you’ll need to complete IRS Form 5405 which will help determine the tax credit amount. You’ll then claim that amount on line 69 of your 1040 tax return form. No pre-approval forms or applications are required!




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