5 Important Questions Answered About The First Time Homebuyers Tax Credit
In my opinion, not enough people out there know about this great benefit that is being offered right now for first time homebuyers. If you buy a home between now and Nov. 30th of this year you are eligible for a tax credit of $8,000! That's a HUGE benefit!
But there are a lot of questions out there about the details. I wanted to answer the top five questions I've been hearing about the credit.
#1 Does the credit need to be re-paid?
No. There is no re-payment required. Repayment would only be required if you sell the property within 3 years of purchase.
#2 Is the amount 10% of the purchase price, $7500 or $8000?
In 2008 the limit was $7500 but it has been raised to $8000. More specifically, the credit amount is 10% of the purchase price OR $8000, whichever is less. So unless you are buying a home under $80,000, your credit will be $8000.
#3 What defines a First Time Homebuyer?
For the purpose of this credit, a first time home buyer is someone who has never owned a home or has not owned a home for 3 years prior to this purchase. Also, the home purchased must be used as the primary residence.
#4 Are there income restrictions?
Yes. An important term to remember here is Modified Adjusted Gross Income (MAGI). If you're not familiar with this term you can find your MAGI by looking at:
Line 37 on your IRS 1040 or Line 21 on your 1040A or Line 4 on your 1040EZ
Or can consult your tax professional.
The limit for a single taxpayer is a MAGI of $75,000 or less. The limit for married taxpayers is a MAGI of $150,000 or less. Keep in mind that there are partial tax credits available for taxpayers who exceed the income limits. Use IRS Tax form 5405 to help determine this amount.
#5 Do I have to wait until April 2009 to claim my credit?
No. You have the choice to claim your credit on your 2008 taxes or wait until you file your 2009 taxes. Even if you have already filed 2008 taxes you can file an addendum to receive your credit.
***Please note that it is always advisable to consult with your tax professional when looking for advice regarding your taxes***