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The Home Buyer Tax Credit
Significant tax incentives exist for both first-time buyers and those who already own.
An extension of the first-time home buyer tax credit signed into law on November 6, 2009 provides an incredible incentive for existing owners.For both groups, the tax credit is available to those who sign a purchase agreement before April 30, 2010.
For existing owners
Existing homeowners are eligible for a tax credit of up to $6,500 ($3,200 for those who are filing separately). Here are some more details:
-You must have owned your home and used it as a principal residence for at least five consecutive years of the previous eight years. (E.g. If you sold a home you owned and lived in for five years two years ago, and have been renting since, you’d still be eligible for the credit.)
-As long as there is a written, binding contract to purchase that is signed before April 30, 2010, you will be eligible for the credit. You will have until July 1, 2010 to close.
-The income limits to qualify for the full credit are $125,000 for a single person and $225,000 for a married couple. Individuals earning up to $145,000 and married couples earning up to $245,000 are eligible for partial credit.
-The credit cannot be used on homes costing more than $800,000. This is an absolute ceiling.
-Your new house does not need to cost more than your old house for you to be approved for the credit.
Claiming your credit is easy, but you will need to include documentation of the purchase with your tax return and the form for claiming the credit.
To learn more, click here.
For first-time buyers
The first-time buyer credit of up to $8,000 has been extended to April 30, 2010. To qualify, you must have a written, binding contract in place before April 30, 2010, and close the transaction before July 1, 2010.
Another aspect of the bill that extends the credit is an increased income limit. The income limits to qualify for the full credit are $125,000 for a single person and $225,000 for a married couple. Individuals earning up to $145,000 and married couples earning up to $245,000 are eligible for partial credit.
Here are some additional details about the tax credit first-time buyers should consider:
-"First-time home buyers" are defined as buyers who have not owned a principal residence during the three-year period prior to the purchase. For married couples, both spouses need to fit this requirement to qualify for the tax credit.
-These home buyers can receive a tax credit on their income tax return in the amount of 10% of the cost of a single-family home used as a principal residence, set to a maximum amount of $8,000. The credit is available for any type of home.
-The credit does not have to be repaid.
Instructions
Claiming the tax credit is easy; you can claim it on your federal income tax return. Complete IRS Form 5405 to determine your tax credit amount, and then claim this amount on Line 69 of form 1040. No other applications are needed. To download the IRS Form 5405 for claiming the tax credit, click here.
To learn more, click here.
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