A Sweet Deal for HomebuyersThe ins-and-outs of the Homebuyer Tax Credit
you are â€“ like many Americans â€“ 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 that has been expanded to
current homeowners as well.CREDIT AMOUNTS
First-time homebuyers: The credit is equivalent to 10 percent of the purchase price of the home up to $8,000.
Current homeowners: The credit is equivalent to 10 percent of the purchase price of the home up to $6,500.OTHER IMPORTANT NOTES REGARDING THE CREDIT
Qualifying for the homebuyer credit 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. Current homebuyers must have used the home being sold as
a principal residence for at least five of the previous eight years.
The purchase must be of a principal residence.
2. Income limitations
First-time buyers: Single filers with modified adjusted gross income of
$75,000 or less and married couples with MAGI of $150,000 or less are
eligible for the full $8,000 credit. Current homeowners: Single filers
with modified adjusted gross income of $125,000 or less and married
couples with MAGI of $225,000 or less are eligible for the full $6,500
3. Purchase window The 2009 homebuyer tax credit is
retroactive to January 1, 2009 and covers purchases through April 30th,
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, letâ€™s say you qualify for the full $8,000 first-time
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. Purchase limitationsThe tax credit is limited to purchased homes up to $800,000.
Claiming the credit Claiming the credit is actually very simple. To
take advantage of the first-time homebuyer credit, youâ€™ll need to
complete IRS Form 5405 which will help determine the tax credit amount.
Youâ€™ll then claim that amount on line 69 of your 1040 tax return form.
No pre-approval forms or applications are required!
As with most
issues related to a home purchase, be sure to consult with your
RealEstate.com REALTORÂ® for additional information or to ensure that
you and your prospective purchase qualifies for this homebuyer tax
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