First-Time Homebuyer Tax Credit

I am getting lots of emails concerning the $8,000 tax credit for first time homebuyers that is part of the The American Recovery and Reinvestment Act of 2009 ...

* Tax credit equals lessor of 10% of the property's value or $8,000 * Effective for properties bought between January 1, 2009 and December 1, 2009

* The property purchased must be single-family (condos & townhouses included) and used as a principal residence for three years.

* There is an income limit of $75,000 per individual (adjusted gross income) or $150,000 if filing a joint reurn. Individuals above these salaries may still receive a portion of the tax credit. IRS Form 5405 will help to determine this.

* Only first-time homebuyers are eligible or the purchaser (and purchaser's spouse) must not have owned a principal residence in the last three years

* This tax credit does not have to be repaid if the property is purchased between 1/1/09-12/1/09 This tax credit can be used on all FSBO.com properties, as long as indviduals meet the federal criteria. This is just a basic summary, AcmeInstitute.com recommends you consult a tax professional for more specific information that may pertain to you, as several states also have local policies.

FAQ

If the seller pays part of the closing cost, does that reduce the basis for the credit?

The credit is based on the purchase price.  No where on Form 5405 does the IRS require one reduce the purchase price to calculate the credit.

If the house has to be sold before three years are the exceptions to paying back the grant?

1. The following are exceptions to the repayment rule. If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. When figuring the gain, reduce the adjusted basis of the home by the amount of the credit.

2.  If the home is destroyed, condemned, or disposed of under threat of condemnation, and you acquire a new main home within 2 years of the event, you do not have to repay the credit. If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit.

3. If you die, repayment of the credit is not required. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the credit.