The tax credit is available for first time home buyers only.
The maximum credit amount is $8,000
The credit is available for homes under contract by April 30, 2010 and close by June 30, 2010
Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
You can use down payment assistance with one of our state nonprofit organizations and still qualify for the $8000 tax credit.
If you bought a home recently, or are considering buying one, the following questions and answers may help you determine whether you qualify for the credit.
Who is eligible to claim the $8,000 tax credit? First time home buyers purchasing any kind of home�new or resale�are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before June 30, 2010 For the purposes of the tax credit, the purchase date is the date when closing occurs.
What is the definition of a first-time home buyer? The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
How do I claim the tax credit? Do I need to complete a form or application? Applying for the credit will be easy � or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their taxes can file amended returns for 2008 to claim the credit.
What types of homes will qualify for the tax credit? Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.
Does the credit amount differ based on tax filing status? No. The credit is in general equal to $8,000 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer.
Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $8,000 tax credit? In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $8,000. For most first-time home buyers, this means the credit will equal $8,000. For home buyers purchasing a home priced less than $80,000 the credit will equal 10% of the purchase price.
I heard that the tax credit is refundable. What does that mean? The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
What is the difference between a tax credit and a tax deduction? A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives a $8,000 tax credit would owe nothing to the IRS.
Does the credit have to be paid back to the government? The buyer must keep the home for at least three years to avoid paying back the tax credit.
For more information, please contact us at 720-482-3000.
Information on this web site for general guidance only. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.
