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The 2009 First-Time Homebuyers Tax Credit

If you're a first-time homebuyer, you're still in luck but may be running out of time.  A while back Congress passed a tax credit for first-time homebuyers, which gives an opportunity to earn up to $8,000 when purchasing a home. Read on to find out how this credit works and whether or not you qualify for it.

What Constitutes a First-Time Homebuyer?

You may be classified as a first-time homebuyer and not even know it. Obviously, if you haven't previously owned a home you fall into the category of first-time homebuyer. But did you know that if you haven't owned a principal residence (a location where you spend more than 50% of your time) in the past 3 years you also constitute what we call a first-time homebuyer? It's important to note that if you're married, both you and your spouse qualify for this tax credit if neither of you have owned a principal residence in the past 3 years. If either of you have, you don't jointly qualify. If you're unmarried, you can jointly purchase a home with somebody if one of you qualifies as a first-time homebuyer. The catch is that you have to allocate the credit amount to the individual who qualifies. This sometimes happens if a parent decides to jointly purchase a home with a son or daughter. Remember, you still qualify for this tax credit even if you have a vacation home or rental property that isn't used as a primary residence.

How Can I Earn a Partial Tax Credit?

If your individual income is between $75,000 and $95,000 or if your joint income is between $150,000 and $170,000, then you are in what we call the phase-out area. This is the income bracket where you will receive a partial tax credit, but not a full one.

Here's an example of how you can determine your partial tax credit. Let's say as a single individual you have a modified adjusted gross income of $79,000. Your income exceeds $75,000 by $4,000. Dividing $4,000 by $20,000 (the difference between $75,000 and $95,000) gives you 0.2. When you subtract 0.2 from 1.0, the result is 0.8. Then multiply $8,000 by 0.8 to get $6,400. $6,400 is your partial tax credit. For additional information, contact your tax advisor, or check out the following phase out charts:

Is There a Repayment Process?

The best part about this credit is that there's no repayment as long as you don't sell the home within three years of purchase. If you choose to do so, the entire amount of credit is due back to the government at the time of sale. But this only applies to homes purchased in 2009, and it's the biggest difference between the 2008 tax credit of $7,500 and this year's credit of $8,000. Last year's credit acted as more of an interest-free loan.

How Do I Claim the Tax Credit?

You can easily claim the tax credit on your federal income tax return. Start by completing the IRS Form 5405 to determine your tax credit amount, then claim this amount on Line 69 of your 1040 income tax return. Be sure that you qualify for the credit before filling in these forms.

Can I Claim the Credit on My 2008 Tax Return?

It can be claimed on your 2008 Tax Return (to be filed by April 15, 2009), an amended 2008 Tax Return, or your 2009 Tax Return. The NAR and industry partners tried to get the credit made available at closing but the IRS balked. In addition, it was explained that even if a system could be devised, it would delay closings by several weeks. Make sure to contact your tax advisor for details on the process.

Can I Receive the 2009 Credit If I've Already Filed for the 2008 Credit on my 2008 Returns?

Yes, you may be able to file an amended 2008 tax return with a 1040X form. Make sure to work with your tax advisor to execute a successful return.

I reproduced this information from the Real Living Site.

For more details call me at 614-273-6406 or email me at vanessa.simmons@realliving.com.  Please do not let this opportunity pass by you it could be gone just like the Cash for Clunkers so don't miss out contact Vanessa today.