The US government implemented the American Recovery and Reinvestment Act in 2009, and it gives first time home buyers a one time tax credit of eight thousand dollars. The key elements to the credit are that you have to be buying your primary residence – that is – the home you’re going to live in. And second, you have to buy the home sometime during most of 2009 – from the first of January to the first of December.
Here are some critical aspects of the program. First, you can’t have owned a home in the three years before the date of your current purchase; this is the definition of a first time home buyer. If you’re married, this applies to both of you.
The tax credit, while it can be eight thousand dollars, might not be that high; it is calculated based on the purchase price of the residence. The credit is ten percent of that price, up to the maximum of eight thousand.
To properly claim the credit, you must close on the home between the timeframe – January First to December First – and then you claim it on your tax return filed in 2010. You will need the Form 5405, and file it with the IRS, in order to get the amount properly recorded in their files. Also, the amount will then be entered into line 67 on the 1040 income tax paperwork. You don’t need any other form of paperwork, and you don’t even have to speak to the IRS to get the amount pre-approved. One little warning with the credit, you can’t use Form 5405 to claim the credit on a future purchase that is going to take place after the December First deadline.
While the type of home you can buy is very flexible – you can even buy a houseboat, so long as it’s going to be your primary residence – you are limited in whom you can buy it from. Buying it from a member of your immediate family – parents, children etc – is not allowed.
So, while the credit is good, time is swiftly running out; if you’re going to make use of it – hurry.