2008:*
The stimulus package passed last October included the now famous $7,500 tax credit for 1st Time Home buyers closing their escrow AFTER April 8, 2008 and BEFORE July 1, 2009. Consider these dollars a ZERO interest loan from your Uncle Sam. There are certain restrictions and you must begin repaying the loan the second year after claiming the credit.
The repayment amount is $500.00 per year for 15 years. Some exceptions apply to the repayment rule:
- If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount.
- If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property. There are special rules for involuntary conversions. Taxpayers are urged to consult a professional to determine the tax consequences of an involuntary conversion.
- If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.
- If you transfer your home to your spouse, or, as part of a divorce settlement, to your former spouse, that person is responsible for making all subsequent installment payments.
The credit is 10 percent of the purchase of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing a joint return; $3,750 for married persons filing separate returns. The full credit is available for homes costing $75,000 or more.
If any of the following describes you, you cannot take the credit:
- Your income exceeds the phase-out range. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
- You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
- You stop using your home as your main home.
- You sell your home before the end of the year.
- You are a nonresident alien.
- You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.
- Your home financing comes from tax-exempt mortgage revenue bonds.
- You owned another main home at any time during the three years prior to the date of purchase. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another main home at any time from July 2, 2005, through July 1, 2008.
2009: This plan to be signed by the President on Tuesday currently includes an $8,000 tax credit.
To apply for this credit your purchase needs to be between the dates of December 31, 2008 and December 1, 2009. Recapture has been waived, meaning that there is no repayment requirement. The exceptions remain the same as the ones for the repayment rule above. The provisions for non qualification due to use of financing that came from tax-exempt mortgage revenue bonds has been stricken.
To claim your 2008 tax credit of up to $7,500 you will need to file form 5405 with your tax return.
Here is your link to form 5405. http://www.irs.gov/pub/irs-pdf/f5405.pdf
Here is a link to Q&A about the 2008 credit on the IRS site. http://www.irs.gov/newsroom/article/0,,id=187935,00.html
* This information is from the IRS site.
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