Okay, here are some answers to the new tax credit (up to $8,000) for first time homeowners. Many people have been asking questions, so here are the answers.
First of all, a tax credit is completely different from a tax deduction. With this tax credit, you get a dollar-for-dollar decrease in the amount of taxes you owe. A tax deduction is a decrease in taxable income, which is what you are taxed on. Of course, a tax credit is much better.
To qualify for this tax credit (up to $8,000), you must be considered a first-time homebuyer. The federal government defines a first-time homebuyer as anyone buying a home to use as their primary residence, that have not owned another primary residence within the preceding three years. If you own a rental home or a vacation home, but do not own a primary residence, you would still qualify. Married couples only qualify if both have not owned a primary residence within the preceding three years, but unmarried co-purchasers qualify if at least one of you fits the criteria.
How the tax credit works is it is good for 10% of the home's sales price, up to $8,000. So, if you purchase a home for $80,000 or more, if you qualified, you would receive the full $8,000 tax credit. The buyers modified adjusted gross income can be no more than $75,000, or a combined $150,000 if married. If your income is greater than these amounts, you can still receive partial credit, but it gets smaller as your income increases. You also do not have to be a US citizen to qualify for the tax credit, as long as you live in the United States.
The time period you will qualify for in buying a new primary residence is from January 1, 2009 through December 1, 2009. If you already applied for the $7,500 temporary tax credit, you can still apply for the $8,000 tax credit by filing an amended tax return using the 1040X form.
This $8,000 tax credit is a refundable credit. That means if you owe less in taxes than the tax credit, you will actually receive a check for the difference from the IRS. If you owe no taxes from income, and you qualified for the full $8,000 new homebuyer tax credit, and filed your taxes, then you would receive a refund check for the full $8,000.
The best part about the $8,000 tax credit is you can actually apply for it against your 2008 tax return. The law allows you to treat qualifying home purchases in 2009 as if they had occurred on December 31, 2008. Anyone eligible who purchases a home before filing your 2008 tax return can receive the $8,000 tax credit on your 2008 taxes. Even if you have not purchased a home, you can still claim the $8,000 tax credit for your 2008 tax return. You must qualify and purchase a home by December 1, 2009, or else you will have to repay all the tax credit money back to the IRS on your 2009 tax return.
I hope this helps, and if you have any additional questions, you can contact The National Association of Home Builders who have set up a website at www.federalhousingtaxcredit.com.
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