There are so many different stories floating around about the new tax credit and how it works, so I decided to get the truth from the source.Who is a “First-Time Homebuyer”?2008 or 2009 purchase: You are considered a first-time homebuyer if you (or your spouse) have not owned a principal residence during the three year period ending on the date of purchase.
What property is eligible? 2008 or 2009 purchase: All principal residences within the United States are eligible. This includes single-family attached and detached homes, manufactured homes, and houseboats. The definition of principal residence is identical to the definition under the $250,000/$500,000 capital gain exclusion rules.
When must the home be purchased? 2008 or 2009 purchase: You must close the purchase after April 8, 2008 and before December 1, 2009. If you build the home you are treated as having purchased it on the date you first occupy it.
How much is the credit? 2008 purchase: Lesser of 10% of the home’s purchase price or $7500.2009 purchase: Lesser of 10% of the home’s purchase price or $8000.
When is the credit claimed? 2008 purchase: 2008 tax return.2009 purchase: 2008 or 2009 tax return. You can purchase in 2009 and take the credit on your 2008 taxes.
Is an unused credit refundable? 2008 or 2009 purchase: Yes, any unused credit is refundable, even if you have little or no federal income tax liability to offset.
Wouldn’t that be a nice check to get? Isn’t the credit just an interest free loan?
Won’t I have to repay it? 2008 purchase: Repay in equal installments for fifteen years beginning with 2010 tax return. 2009 purchase: No repayment.
What other situations would require me to repay the credit? 2008 purchase: Remaining balance of repayment amount becomes due if the home ceases to be your principal residence within the fifteen year period. 2009 purchase: Entire credit amount must be repaid if home ceases to be your principal residence within the thirty-six month period beginning on the purchase date. 2008 or 2009 purchase:–If you sell the home, convert it to business or rental property, or
the home is destroyed or condemned and not replaced within two years, you’ll have to repay at least part of the credit claimed.–Repayment will not exceed the profit on sale, if sold to an unrelated person.–The spouse receiving the home in a divorce settlement is responsible for any repayment.–Repayment is not required if you die. Now there’s a tax plan.
Are there income limits to claiming the credit? 2008 or 2009 purchase: –Full credit available for single and head-of-household taxpayers with modified adjusted gross income (MAGI) below $75,000 (Married Filing Joint (MFJ) is $150,000).–No credit if MAGI exceeds $95,000/$170,000.–Maximum available credit phases out between $75,000 and $95,000 single and $150,000 and $170,000 MFJ.
Can I take the credit if I financed my purchase through a state bond program? 2008 purchase: No credit allowed if the home financing comes from tax-exempt mortgage revenue bonds. 2009 purchase: Restriction does not apply.How do I claim the credit?New IRS Form 5405 is used to claim the credit. Anything else?–If two or more unmarried individuals buy the home together, they can allocate the credit amongst the qualified first-time buyers using any reasonable method. For instance, non-qualified parents can help qualified children buy the home, and the qualified children would claim the credit.–It is not yet clear how future job-related moves, foreclosures, divorces or other life events will effect the use of the credit.–Consult a qualified tax professional with any questions.
Please visit www.newhomesforpennies.com for more information or give me a call at 888-226-4981 Ext. 82
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