First Time Home Buyers Tax Credit - Will it Stay or Will It Go?

First-time home buyers tax credit is ending soon, and soon is coming sooner than you realize! There has been talk within the industry that it could be extended into 2010 and the terms may change.

But, no official statement has been made! So, let's deal with what is currently available. Here to help, are answers to some of the questions that you may have regarding the Housing and Economic Recovery Act of 2009:

• A first-time homebuyer is an individual (and the individual's married spouse) who has not owned and used a property as a principal residence at any time during the three years before the date of the purchase of the new residence.

• Applies to purchases that close after April 8, 2008 and before December 1, 2009.

• Applies to purchases of a principal residence only.

• Reduces a taxpayer's tax bill or increases a refund dollar for dollar.

• The credit does not need to be repaid unless you sell your home within a 3 year period of the purchase.

• Tax credit is 10% of the purchase price of the home with a maximum of $8,000 if you purchased your home in 2009 for single taxpayer or a married couple filing jointly. The amount is half that if you are married and file separately.

• There are income limits. The credit is phased out based on your modified adjusted gross income. For married couples filing jointly, the phase out range is $150,000 to $170,000. For other tax payers, the phase out range is $75,000 to $90,000.
  

• Vacation homes and rental property do not qualify.
  

• You must have closed on the property before you can claim the tax credit.

• A home purchased from a close relative does not qualify for the tax credit.

• If within the 3 year period following the purchase, it is no longer used as your principal residence, the taxpayer is required to repay the tax credit.

• Taxpayers can file Form 5405, First Time Homebuyer Credit, electronically.

• If you bought your home early in 2009 and have already filed your 2008 tax return claiming the $7500 first-time homebuyer tax credit under the old rule, you can file an amended return to get credit under the new rule for the $8,000 tax credit.

• If you are now purchasing and would like your money early, you can amend you 2008 tax return. Or you can wait and claim it on you 2009 return.

• For a principal residence purchased in 2009, generally there is no requirement to repay the tax credit. Unless, the home ceases to be your principal residence within 36 months from the date of purchase. Then the full amount of the tax credit received becomes due on the return for the year that the home was no longer your principal residence.

Specifically, first-time homebuyers who purchased a home in 2009, may claim the credit on either their 2008 return (due April 15, 2009) or their 2009 return (due April 15, 2010). If the closing occurred after April 15, 2009, you can claim it on your 2008 return by filing an amended return.