First-Time Home Buyer’s Tax Credit
The American Recovery and Reinvestment Act of 2009 includes a provision that gives first time home buyers a whopping $8000 tax credit if they purchase a new home in 2009 under certain conditions.
The credit is actually the lesser of 10% of the purchase price or $8000. The purchase price can include closing costs, legal fees, and recording fees. Check with your accountant on other items that may be included.
Income limitations also apply to the new home buyer credit. If your modified adjusted gross income is less than $75,000 (individual) or $150,000 (married filing jointly) then you will receive the full credit.
From $75,000 to $95,000 (individual) or $150,000 to $170,000 (married filing jointly the credit phases out. If your income is above $90,000(individual) or $170,000 (married filing jointly) you will not receive the first time home buyer’s credit.
The Credit applies only to a Main Home. This is defined as the one you live in most of the time. It can be a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence. Could this include a car? Who knows?
Repayment may apply. If you decide to sell the home, you convert it to business or rental property, or the home is destroyed, condemned, or disposed of under threat of condemnation. or for any other reason the home ceases to be your main home within 36 months you are required to repay the credit.
A few exceptions apply to repayment. If you sell your home to someone that is not related to you during those first three years the amount of repayment is limited to the gain on the sale.
If your home is destroyed, condemned, or disposed of under threat of condemnation you will not be responsible to repay the credit if you purchase a new main home within 2 years of one of those occurrences.
If you die (obviously) you do not have to pay back the credit. Your spouse will, however, be responsible for 1/2 of the repayment.
The home must be in the United States and you must be a U.S. citizen.
The First Time Buyers definition includes anyone that has not owned a main home within three years of the purchase. This is a very liberal definition and may apply to all kinds of home buyers. If you owned a vacation home that you did not live in as a main home you should still be eligible for the credit.
To claim the credit you must file a Form 5405 and can be filed on your 2008 or 2009 tax return, If you have already purchased a home in 2009 you may amend your return and receive the credit this year.
Now For the Really Good News! This tax credit is REFUNDABLE. In essence this means that even if you have no tax liability you still get the credit in the form of a refund check.
For those that purchased a home in 2008 you can still get a $7500 tax credit but you have to pay it back. You have to wonder what was going their heads when they didn’t just update the 2008 credit. To go there would risk insanity.
As with any matter concerning your income taxes you should always consult your accountant or attorney for the details.
All in all the First Time HomeBuyer Credit is a great deal for those looking to buy a home in 2009. Home prices are low, interest rates are low, now you get $8000 too! Maybe next year they will just give you one!