$6,500 to $8,000 1st Time & Existing Home Buyer Tax Credit

1st time Buyers

·        The new law authorizes a tax credit, up to  $8,000, for you if you have not owned a home during the past three years. 

      If you own a home that you rent out in one city, but you have rented a home or apartment in another location for the past 3 years, you may qualify. A primary residence is identified as a home that someone lives in greater than 50 percent of a year.

·       The tax credit is good for any PRIMARY Residence purchased on or after November 6, 2009 that is under contract by April 30, 2010 and closes before June 30, 2010. This includes homes that are newly built as along as they are closed before the June 30,2010.

·         If you buy in 2009 or 2010, you have the option of taking the credit on your 2009 or 2010 tax return.

·         The Tax Credit equals 10% of the Purchase Price of your new home up to the limit of $8,000

·         If you are single, and have an adjusted gross income of up to $125,000, you are eligible to take the full credit. If you are married, filing a joint return, the income limit doubles to $225,000.

·         If you are single and buy the home with another single individual, or you are married but file your taxes separately, the limit of the tax credit per person is $3,750.

·         If you are single and earn between $75,000 and $95,000, you can claim a partial credit of less than $8,000. The phase-out for married couples ends for those earning above $170,000. 

·         Since the tax credit is refundable, it means that you can claim the credit even if you owe little or no federal income taxes. In other words, the government will write you a check if the taxes you owe are less than the amount of the credit you can claim.

o   For example, if you owe the federal government $2,500 in federal taxes and qualify for the $8,000 home buyer tax credit, you will receive a $5,500 refund check from the IRS ($8,000 minus the $2,500 owed).

·       Congress has mandated that the tax credit essentially serves as a "gift" unless you sell the home within 3 years. If that occurs the TOTAL credit must be repaid at the time of the sale.

·       You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns)

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Existing Home Owners

·        The new law authorizes a tax credit, up to  $6,500, for you if you are an Existing Home Owner. 

      An Existing home owner is defined as someone who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

·         The tax credit is good for any PRIMARY Residence purchased on or after November 6, 2009 that is under contract by April 30, 2010 and closes before June 30, 2010. This includes homes that are newly built as along as they are closed before the June 30,2010.

·         If you buy in 2009 or 2010, you have the option of taking the credit on your 2009 or 2010 tax return.

·         The Tax Credit equals 10% of the Purchase Price of your new home up to the limit of $6,500 for homes that cost less than $800,000.00

·         If you are single, and have an adjusted gross income (AGI) of up to $125,000, you are eligible to take the full credit. If you are married, filing a joint return, the income limit doubles to $225,000. (On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains

·         If you are single and buy the home with another single individual, or you are married but file your taxes separately, the limit of the tax credit per person is $3,250.

·         If you are single and earn between $125,000 and $145,000, you can claim a partial credit of less than $6,500. The phase-out for married couples ends for those earning above $245,000. 

·         Since the tax credit is refundable, it means that you can claim the credit even if you owe little or no federal income taxes. In other words, the government will write you a check if the taxes you owe are less than the amount of the credit you can claim.

o   For example, if you owe the federal government $2,500 in federal taxes and qualify for the $6,500 home buyer tax credit, you will receive a $4,000 refund check from the IRS ($6,500 minus the $2,500 owed).

·       Congress has mandated that the tax credit essentially serves as a "gift" unless you sell the home within 3 years. If that occurs the TOTAL credit must be repaid at the time of the sale.

·       You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns)

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