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 P.O. Box 1208 , 250 Route 49 in Campton , NH 03223
phone 603-726-8642 or 603-726-8941 website www.kingrealtynh.com
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Most people hearing that the 15,000 credit to all buyers was off the table, think that only first time homebuyers have an incentive in the stimulus package to buy real estate. Well that it the way it is written but did you know if you have not owned a home in your name in the last three years, you are a first time home buyer by their definition. The credit is $8,000 and not the 15,000 but that a good chunk of change and could help you buy. Here are the details from the website of the National Association of Home Builders that can help you assess if you qualify : If you do don't doddle the credit is only available for purchased that close before June 30 of this year Although some places on the internet I have seen August and end of December- I do not know which it is actually is but I would assume the June 30th deadline and be pleasantly surprised if it is the later). One other point This website reports that the bill also "Allows state housing finance agencies to help buyers at closing by advancing the credit as a loan using proceeds from tax-exempt bonds." So do not forget to check with your lender as to whether you qualify and it is the appropriate loan package for you , to go through a program offered NH Finance .
- Who is eligible to claim the 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 December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
- 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. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. 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 is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.
- Are there any income limits for claiming the tax credit?
The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
- What is "modified adjusted gross income"?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and 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.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
- If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
- Can you give me an example of how the partial tax credit is determined?
Just as an example, 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 home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Here's another example: assume that an individual home buyer 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.
Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
- How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
- How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. 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 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
- What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
- I read 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 the 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).
- I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
- Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.
In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
- Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
- I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.
- I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
- Is a tax credit the same as a tax deduction?
No. 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 an $8,000 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer's tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
- I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.
- Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
- If I'm qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
- For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
We have a lot of great first time homes available , give us a call and let us help you into you new home
603-726-8642 office
603-236-1002 Terri Qualters cell
603-254-7037 Darlene King-Jennings cell
This is really very good. You covered some points I haven't seen before.
Thanks.
Lenn
Thanks for posting this, Great Job
Dear Darlene,
This is the best post I have seen on the tax credit! Thank you!
I have a few questions.
1- If a buyer's withholding is $4,000 and their tax liability, before deductions is $4,000, do they still get $8,000?
2-If the buyer buys in 2009 and has already filed and received their normal refund, may they file a amended 2008 return?
Thanks,
Barbara
im a single prospective first time homebuyer with two children would I qualify for the eight thousand dollar credit or only half because im not married
The same website says :" single taxpayers with income up to 75,000 and married couples with incomes up to 150,000 qualify for the full tax credit ". I can only go on what they are saying - to make sure you might want to talk with an accountant
Barbara,
I can only go on what the website says. I am not an accountant. I would suggest that if you or a customer have specific questions that are not answered on the site that you talk to an accountant. It is probably a good idea anyway .
I have one question. Does this credit apply to the purchase of a multi family (4-plex) unit if you plan on living in one of the units?
Thank you!
Darlene,
Well written and good points! I'm still trying to find some info on multi family purchases. I'm working with this couple who are first time homebuyers but are looking to buy a two family - live in one and rent the other unit. I see E has a similar situation.
Gina
Great information...closing on a home at the end of march and was looking for all of the first time buying programs..great job keep us up on the latest...
Thanks for this article, very informative. what was the website that you got this information at?
Gina,
According to duplexchick.com she has checked with a number of accountants who use the definition of main house say that small multis do qualify if owner occupied . The question that I would ask of an accountant is how much of a purchase would qualify as it might be that the percentage of the purchase that represents the owner occupied portion of the multi price is all that will qualify. Before a buyer should go in full scale they should check in with their accountant to make sure what portion qualifies if not all of it.
very informative. I do have one question though. I'm planning on buying a place jointly with my brother (both first time buyers, both single). How does it work? Does our combined salary need to be below $75,000? Do we both qualify for the $8,000? I haven't been able to figure that part out yet.
Cynthia,
I am a real estate broker and not an accountant. My first thought is that you should talk with you accountant as they are the only ones that can answer these questions with any knowledge. I can only repeat what it says in the law and can not interpret it. . The law states that this has to be your primary home for you to take this credit. That said as I understand your question, by purchasing with your brother it would appear to me to be no different than if you bought with a spouse. If that be the case I would expect that it is the same income maximums , you can not make more than 75,000 individually or 150,000 together. The 8,000 is per property and is a maximum based on 10% of the purchase price with a maximum of 8K. Again it would be an interpretation of the law that should only be made by an accountant but the only exception that I could think of relating to your question is if you are buying a duplex and you are going to occupy one side and your brother the other . This should definitely be asked to an accountant ib the event that the answer is different from 8K maximum per property . Again talk with an accountant. Thanks, Darlene
Question: If I am a first time buyer and purchasing a home thru a private individual on a sales contract and NOT a financial institute, do I qualify for this tax credit. And if I owed no tax would I actually see the the credit in a check form back to me?
Thanks,
Paula
Darlene, We need to get the word out about this fabulous tax credit incentive for first time home buyers who purchase homes in 2009! Great job!
Paula,
Buying through a seller should make no difference in whether you qualify or not no matter where you get the funds to purchase . The question might be different if you buy through a bond for deed or some other form in which the title to the property does not transfer to you until some later time . But if you are doing traditional seller financing where the seller takes the mortgage and the deed is transfered to you , and if you qualify under the other terms of the stimulus you should qualify. If you did a bond for deed (which might be called something different in your state) or any other form where the deed is still in the name of the person who sold it to you, you might want to quickly call an accountant . If the property is not in your name then you might not have a real way of proving that you purchased . I say might- call an accountant they can give you the best advice on this .
My husband and I have lived in a trailer for 24 yrs. We want to move into a new 2009 home. Can we still qualify for the credit?
Chrissy,
I am not an accountant so I would say check with one for sure . The way that I read the plan is that a trailer qualifies as a first time home. If the trailer that you now live in is in you and your husbands name, the way I read it, you are in your first home and therefore do not qualify. But there may be some hitches in the law , so you might contact an accountant to see if there is one that would meet your goal. Sorry
This really is an excellent post. I wasn't quite clear as to how this credit worked until I read through this information. Very informative, and thank you!
My name came off of the last home I co-owned on April 19, 2006. Can I still apply for the
$8,000 tax credit if I close on a new home on March 31, 2009? Is that close enough to 3 years
or does it have to be on or after the exact date?
Thank you
beaglelover,
I have heard and have found not confirmation anywhere out there that some exceptions are being made in the case of divorces . I do not know in what cases and even if it is true . But even if it is not true(and if you qualify under the other terms) you would qualif after April 20, 2009 (3 years) . You just have to close before 12/1/09. So you have to wait until the 20th if April to close if you want to get the stimulus . Since those closing before it took affect do not get to get in, I am guessing if you close on the 31 of March you don't but talk to an accountant - there might be something to the divorce angle .
I did a poll on my site and many home buyers sitting on the fence are actually excited about this tax credit. So I don't under stand why one commenter said this break would make people mad.
- Ben
http://www.8000credit.org
I am wanting to know if the credit that missouri is giving can be used at closing to reduce credit debt.
I am looking at a usda 100% loan, but to recieve the loan i must reduce my credit card debt by 2500.00!
The closing cost are 3750, the state is giving up to 6750.00, which leaves and excess of 3250.00. is it possible to have the credit cards that i want payed down to be part of the closing cost to use the max amount given by the state?
My fiancee would like to purchase a home. (I already own a home.) She has only sent in an extended return for 2008. Since she has never owned a home, would she still qualify since we will be getting married later this year and will both live in the home? It seems like she would since she is single and will be filing a single return for 2008 ... ???
I am trying to find out if a house is paid for with cash by one person but the house is put into a relatives name who would claim the tax credit? I would think the person paying for it would need to show it on their taxes somehow but if they are not concerned with reducing their taxes with the $8K then is there a problem with the recipient of the house taking the credit? lk
D.J ,
I am a real estate agent who has done research so I can only tell you what I have read and suggest since it is not a slam dunk that you talk with your accountant . All the research I have done says that if you are married, neither spouse can get the credit if one is not eligible. This is regardless of how you file single or married. But at the time of the purchase she is single so that might make the difference. It is worth the call to you accountant to get the answer.
Linda,
Let me make sure tha tI understand this. The question is John Smith purchases the property for cash and instead of putting the property in his name he puts it into the name of Johanna Smith who is not his wife. Is this what you are asking- names changed ? If this is correct there are a few additional questions I would need to know is this closing in one transaction? In other words is the P&S written out to John smith but closing and deed to Johanna Smith ? or is John Smith buying it closing on it and later changing the deed without monetary exchange? If the first instance is correct, then the closing papers and the deed say that Johanna purchased the property regardless of how she got the money and she would be the only on that could write off anything on her taxes . The problem her is that without proof of a gift of the money there may be other legal complications with the government so you should talk with an accountant . If the second , The way I read the law, the amount of the tax credit is based on how much you spend . So unless the one that the property is being put into pays for the property in some way no credit would be received. By this John smith could purchase the property cash and then deed it to Johanna with a sale price associated with the contract . if he then gave her mortgage that she is to pay . That would would allow her to get the alloted stimulus . If her gave it to her , she would not be able to get any of the stimulus . However an accountant might be able to draw up paperwork that th eproperty sold for x dollars to Johanna with the x dollars being a gift , but I would guess that John would then have to pay taxes on what he did not really make as he gave it as a gift unless possibly this gift would fall under the IRS guidelines for what you can gift. Even if I knew the exact circumstances of this transaction, my recommendations is to talk specifics of what you are trying to accomplish with your accountant . If there is a way they should be able to help you . Good luck
does this tax credit apply to the purchase of bare land. Also the land maybe be an owner contract what problems do you foresee me running into.
Thanks Josh
I am an American citizen living in Canada. I bought a home here in 2005. I am going to be leaving Canada and buying a home in the US this year. Will my out of country home ownership disqualify me for the first-time buyer tax credit or will the program consider me a first time buyer because I have never owned property in the US?
Judd,
This is beyond my research as a real estate agent so I do not know the answer to your question. What makes sense may or may not be the correct answer . I would suggest that you contact your accountant . This may be a question he/she has already come up against or may have to contact the IRS for clarification. Good luck
I am looking to buy a home with my finace ( we will be married by the time we find a home) and my brother, none of us have owned a home before and we all fall under the income guidlines and so on. If we are all going in on a single home together, can we each apply for the credit? I would think that since my fiance and i willbe married we as a couple will only be able to get a single 8k, but what about my brother, can he get the 8k?
any help would be much appreciated.
Thanks.
jom
Jon,
As I have read the law I believe it is 1 property maximum of 8,000. Up to 80,000 it is 10% of the purchase price and maximum is 8,000. It does not matter how many people purchase and qualify but to be sure check with your accountant. If your brother was buying a second property then it would be different . Darlene
Jon,
As I have read the law I believe it is 1 property maximum of 8,000. Up to 80,000 it is 10% of the purchase price and maximum is 8,000. It does not matter how many people purchase and qualify but to be sure check with your accountant. If your brother was buying a second property then it would be different . Darlene
I need this broken down barney style for me. I just built a home for 150K and I close on the 4th of august. so does this mean at the end of the year they are going to add an additional 8k onto my tax return? I am very confused as to how this really works so a simple and easy explanation would be fantastic.
According to what is written in the websites , If you qualify under all the specifications as a first time homebuyer and you have your accountant file the appropriate forms and including proof of closing and the amount of the purchase (as it is 10% up to 80,000 and then it is 8,000 no matter how high the purchase price is ) along with the appropriate form with your taxes. There is a maximum income requirement so make sure that that fits too.
We are buying a home this year and we are currently looking to get back around $5000 this year from IRS if we do the FTHBC do we get $8000 plus the $5000 or do we not get a credit at all?
My husband and I are not 1st time home buyers. However, we are considering buying a home for our son. Would we be able to include his name on the title and have him receive the credit. He would be a first time homebuyer.
My son and his bride bought their first home, a condo, and closed March 28th 2008. Do they qualify for any tax credit? Just wondering...Thanks for your help!