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A Sweet Deal for First-Time Homebuyers
The ins-and-outs of the $8,000 First-Time Homebuyer Tax Credit
If you are - like many Americans - trying to figure out the best time to make your first home purchase, then you may want to take a closer look at the first-time homebuyer tax credit included in the American Recovery and Reinvestment Act, which was signed into action by President Barack Obama on February 17, 2009.
Repayment
The 2009 homebuyer credit DOES NOT require repayment. Repayment of the credit is only required if the owner sells the property within three years of purchase.
Credit Amount
While the credit is equivalent to 10 percent of the purchase price of the home, the 2009 credit increases the limit of the credit from $7,500 to $8,000.
OTHER IMPORTANT NOTES REGARDING THE CREDIT
1. Qualifying for the homebuyer credit
The credit is for first-time homebuyers only. As it relates to this credit, a first-time homebuyer is defined as any taxpayer who has not owned a principal (or main) residence for a period of three years prior to the home purchase. The first-time purchase must be of a principal residence.
2. Income limitations
The legislation does limit availability of the first-time homebuyer credit based on modified adjusted gross income (MAGI). Single filers with MAGI of $75,000 or less and married couples with MAGI of $150,000 or less are eligible for the full $8,000 credit. Those individuals or couples with MAGI above these limits may be available for a reduced credit on a phase-out basis.
3. Purchase window
The 2009 first-time homebuyer tax credit is retroactive to January 1, 2009 and covers purchases through November 30th, 2009.
4. Refundable credit
The tax credit reduces your final tax liability and you will be refunded whatever portion, if any, of the credit that remains after applying the credit to taxes you owe for that year. For example, let's say you qualify for the full $8,000 homebuyer credit and your total tax liability (after withholding) is $2,000. Your tax liability will be zero, and you will receive a refund for the remaining $6,000.
5. Claiming the credit
Claiming the credit is actually very simple. To take advantage of the first-time homebuyer credit, you'll need to complete IRS Form 5405 which will help determine the tax credit amount. You'll then claim that amount on line 69 of your 1040 tax return form. No pre-approval forms or applications are required!
As with most issues related to a home purchase, be sure to consult with your REALTOR® for additional information or to ensure that you and your prospective purchase qualifies for this homebuyer tax credit.
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