This is the most succinct language regarding the $8,000 Tax Credit that I've found. Please call me if you have any questions, or know anyone that would benefit from this tax credit!
Expanded Tax Credit for First-Time Homebuyers
On February 25, 2009 the U.S. Department of the Treasury announced a tax credit up to $8,000 to qualifying taxpayers under the Administration’s Recovery, Stability, Affordability Plans. The Treasury’s press release that nearly one out of every two homebuyers were buying for the first time. This program will make it easier for these first-time buyers to enter the housing market this year.
“The expansion of the first-time home buyer tax break as part of the President’s recovery agenda gives money to taxpayers when they need it most, while also targeting an important group of buyers. We view our economic recovery plan, our financial stability plan and now this homeowner affordability plan as three legs of the same stool—an integrated whole that represents our immediate response to the current crisis. We remain committed to swift, efficient and effective implementation of all of these components”….Treasury Secretary Tim Geithner
The Internal Revenue Service has posted on IRS.gov a revised version of form 5405, First-time Homebuyer Credit to incorporate provisions from the American Recovery Act. Under this new act, qualifying taxpayers who buy a home this year (starting January 1, 2009) but before December 1, 2009 can claim up to $8,000, or $4,000 for married individuals filing separately, on either their 2008 or 2009 tax returns. UNLIKE THE PRIOR FIRSTTIME HOMEBUYER CREDIT, THIS IS MONEY INDIVIDUALS DO NOT NEED TO PAY BACK.egal, accounting or other expert advice should always be obtained from a competent professional.
As always there are certain limitations which must be followed including:
• Only applies to the principal residence as defined and is identical to the one used to determine whether you may qualify for the $250/$500,000 capital gain exclusion
• No repayment of the tax credit unless the homeowner does not occupy the property for a minimum of 3 years
• A first-time home buyer is defined as someone who hasn’t owned as principal residence for three years prior to the purchase
• Income limits are $75,000 for individuals and $150,000 for married couples
• Parent co-signers are allowed
• The tax credit is equal to 10 percent of the home’s purchase up to a maximum of $8,000
• New or resale homes qualify including single family detached homes, attached homes including condominiums and town-homes, manufactured homes (mobile homes) and houseboats
• Tax credit amount is reduced to zero for taxpayers with modified adjusted gross income (MAGI) of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGI’s between these amounts (When determining MAGI, the IRS defines MAGI as “a taxpayer must first determine adjusted gross income (AGI). AGI is total income for a year minus certain deductions (adjustments), but before itemized deductions from Schedule A or personal exemptions are subtracted…AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.)
• If MAGI is above the limit, partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phase-out limits
• This tax credit is refundable meaning that the home-buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. This involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
• If a taxpayer has already filed to receive the old $7,500 tax credit on the 2008 tax return, taxpayer may amend the 2008 tax return with a 1040X form.
• For purposes of this tax credit, a principal residence that is constructed by the homeowner is treated by the tax code as having been purchased on the date the owner first occupies the home…being between January 1 and December 1,2009.
• The tax credit is a dollar for dollar reduction in what the taxpayer owes… meaning a taxpayer who owes $8,000 in income taxes and who receives a $8,000 tax credit would owe nothing to the IRS. It does not act as a tax deduction.
• For a home purchase in 2009, the law allows taxpayers to choose (elect) to treat the qualified home purchases in 2008 (occurred on December 31, 2008) giving the taxpayer certainty by knowing the 2008 MAGI thus helping the buyer know whether the income limit will reduce their credit amount.
Remember, the difference between this tax credit and the Act Congress enacted in July of 2008 is that this tax credit does not have to be repaid. The previous tax credit was essentially an interest-free loan while this tax credit is a true tax credit!