As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation called the 2009 First-Time Home Buyer Tax Credit that grants a tax credit of up to $8,000 to first-time home buyers.
Who qualifies?
First-time home buyers who purchase homes between January 1 and December 1.
What’s a ‘first-time homebuyer?’
The purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
Which properties are eligible?
The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences including single-family homes, condos, townhomes and co-ops.
How much will the credit be?
The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:
• The price of the home. The credit is equal to 10 percent of the purchase price of the home, up to $8,000.
• The buyer’s income. Single buyers with incomes up to $75,000 and married couples with incomes up to $150,000 may receive the maximum tax credit.
What if the buyer’s income is higher?
Some may still be eligible for the credit.
The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly.
The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income — over $95,000 for singles and over $170,000 for couples — are not eligible for the credit.
Will the credit need to be repaid?
The buyer does not need to repay the tax credit if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.
How does the buyer apply?
Close by November 30, ensure that he/she is a qualified first-time buyer under IRS guidelines, decide which year to file under (2008 or 2009), file an amended 2008 return or choose to apply the credit to the 2009 tax return.
2008 or 2009 tax return?
If the buyer wants the benefits of the credit as soon as possible and chooses to file under your 2008 tax year, an amended return must be filed.
If the buyer anticipates a drop in income in 2009, he/she can wait to claim the credit as part of the 2009 filing. In some cases the value of the credit might be higher, particularly if in 2008 the buyer qualifies for only a partial credit.
How does the buyer claim credit?
• Fill out Form 5405 to determine the amount of available credit.
• File an amended return for your 2008 taxes, or wait and apply to credit when the buyer file the 2009 tax return.