$8000 Home Buyer Tax Credit Basics

The American Recovery & Reinvestment Act of 2009 offers an $8000 maximum tax credit for first-time homebuyers buying homes as their primary residence between January 1 and December 1, 2009. A First-Time Home Buyer is anyone who has not owned a home within the last 3 years. If an unmarried couple jointly buys a home, and one person owned a home (within 3 years) and the other did not, they can “designate” the tax credit to that person who will be able to claim it on their individual tax return. This rule also applies for parents to co-sign on a mortgage. The parents own a home, their son or daughter is FTHB— and may claim the tax credit. Income Limits can be more complicated and first-time homebuyers should always seek advice from a tax expert. The income number is always based on Modified ADJUSTED GROSS INCOME (MAGI). Single taxpayer: MAGI of $75,000 or less, Married taxpayer: MAGI of $150,000 or less. There is also a provision for those single and married who EXCEED the income limits to claim a partial tax credit. A “tax credit formula” has been created to determine. the dollar amount. For example, if a single tax payer’s MAGI is $82,000, their partial tax credit is $5200. Taxpayers can choose to claim their tax credit on either their 2008 tax returns or wait until the 2009 tax year to file. For example, if they exceed the income limit in 2008 (which would only qualify them for a partial credit) but their income has been decreased in 2009 due to a temporary layoff or cut back in over time, they can wait until 2009 to claim the tax credit (for the full tax credit). A FTHB can borrow the dollar amount of the expected tax credit from a relative and pay it back when the tax credit is received. It could be used towards down payment and closing costs. FHA and VA loan programs will allow it. VA 100% loans are now available to $812,500 in the DC area. Higher loan amounts are also available with a down payment equal to 25% of the purchase price above $812,500. The FHA has just implemented new limits in March 2009 for its loan guarantee programs that will allow it to insure mortgages of up to $729,750 with only 3.5% down payment (This loan cap also applies to the FHA 203K renovation loan program).