The first-time homebuyers within certain income limits who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to $8,000.
This is a tax credit, not a tax deduction, meaning its a dollar-for-dollar decrease to your tax liability. Also, the tax credit is refundable, meaning you can receive the full value of the credit even if you do not have an $8,000 tax liability.
The amount for either credit is the lesser of 10% of the home purchase price or $8,000.
The $8,000 credit will not need to be repaid.
If the home is sold within the first three years, the full amount of the credit is due upon sale.
To qualify as a first-time home buyer as defined in the program.
The purchaser (and the purchaser's spouse) may not have owned a home in the three years prior to the purchase date of the home. The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify. For new construction, the purchase date is considered the day you occupy the home; therefore you must move-in by November 30th 2009 to qualify for the tax credit.
Phase-Out
The tax credit phases-out for individuals making $75,000 or over modified adjusted gross income (MAGI), and couples making $150,000 or over MAGI. Below are examples of how the phase-out will apply to the two different scenarios.
Individual Making $75,000 or Over
Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer's income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Couple Making $150,000 or Over
Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
When Can the Tax Credit be Claimed?
The $8,000 tax credit can be claimed for your 2008 tax year (filed by April 15th 2009), 2008 amended return or 2009 tax year.
Who Cannot Take the Tax Credit
- Individuals making $95,000 or over MAGI, and couples making $170,000 or over MAGI; meaning you receive no tax credit if your income is this much or more a year.
- You buy your home from a close relative, including: parent, sibling, spouse, grandparent, child, etc.
- You sell your home within the first three years of purchasing it. If this occurs, the tax credit must be repaid.
- You are a non-resident alien
How About Those Who Purchased Homes in 2008?
Homes purchased in 2008 are subject to the $7,500 repayable tax credit if taken on their tax returns.
