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| TAX CREDIT EXTENDED - Updated November 5, 2009 | | CURRENT HOME OWNERS - CLICK HERE - INFORMATION ABOUT $6,500 TAX CREDIT |  | | Congress just extended the $8,000 tax credit through April 30, 2010. The $8,000 credit (or 10% of the home's value, whichever is less) is to be claimed on their 2008 or 2009 taxes. The credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year- was less than that amount. To qualify for the credit, the purchase must be made between January 1, 2009 and April 30, 2010. Buyers may not have owned a primary home (lived in it) for the past three years to qualify as "first time" buyer. They must also live in the house as their primary residence for at least three years, or they will be obligated to pay back the credit. Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit. To qualify, buyers must make less than $125,000 for singles or $225,000 for couples. (Higher-income buyers may receive a partial credit.) | | | FEATURE | Jan 1 – November 30, 2009 Rules as enacted
February 2009 | November 7 – April 30, 2010 Rules as enacted
November 2009 | First-time Buyer
Amount of Credit | $8000
($4000 married
filing separate) | $8000
($4000 married
filing separate) | First-time Buyer
Definition for Eligibility | May not have had an interest in a principal residence for 3 years prior to purchase | Same | | Termination of Credit | Purchases after November 30, 2009. (Becomes April 30, 2010 on Date of Enactment.) | Purchases after
April 30, 2010 | | Binding Contract Rule | None | So long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close | Income Limits
(Note: Increased income limits are effective as of date of enactment of bill) | $75,000 – single
$150,000 – married
Additional $20,000 phase out | $125,000 – single
$225,000 – married
Additional $20,000
phase out | Limitation on Cost of
Purchased Home | None | $800,000
November 7, 2009 | | Purchase by a Dependent | No Provision | Ineligible
November 7, 2009 | | Anti-fraud Rule | None | Purchaser must attach
documentation of purchase to tax return | |
WHO QUALIFIES?
First-time home buyers who purchase a home between January 1, 2009 and April 30, 2010. To qualify as a ‘first time home buyer' the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
WHICH PROPERTIES ARE ELIGIBLE?
The 2009 First-Time Home Buyer Credit may be applied to primary residences, including: Single-family homes, condos, town homes and co-ops.
HOW MUCH WILL THE CREDIT BE?
The maximum allowable credit for home buyers is $8,000. Each home buyer's tax credit is determined by two factors:
The price of the home--The credit is equal to 10% of the purchase price of the home, up to $8,000
The buyer's income--Single buyers with incomes up to $125,000 and married couples with incomes up to $225,000--may receive the maximum tax credit.
WILL THE TAX CREDIT NEED TO BE REPAID?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.
WHAT ARE THE NEW DEADLINES?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than July 1, 2010.
WHAT IS A TAX CREDIT?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit and individual is owed. Unlike the tax credit that existed in 2008, this credit does NOT require repayment unless the home, at any time in the first 36 months of ownership is no longer an individual's primary residence.
CAN HOMEBUYERS CLAIM THE TAX CREDIT IN ADVANCE OF PURCHASING A PROPERTY?
No. The IRS has recently begun prosecutin g people who have claimed credits where a purchase had not taken place.
CAN A TAXPAYER CLAIM A CREDIT IF THE PROPERTY IS PURCHASED FROM A SELLER WITH SELLER FINANCING AND THE SELLER RETAINS THE TITLE TO THE PROPERTY?
Yes. In a situation where a buyer purchases the property, even through the seller retains legal title; the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed. According to the IRS, factors that would demonstrate the ownership of the property would include.
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price.
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
ARE THERE OTHER RESTRICTION TO TAKING THE FTHB CREDIT?
Yes. According to the IRS, if any of the following describe a home buyer's situation, a credit would not be due: - They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the questions below for details regarding purchases from "step-relatives.")
- They do not use the home as their principal residence .
- They sell their home before the end of the year.
- They are a nonresident alien.
- They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for home purchased in 2009.)
- Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
- They owned a principal residence at any time during the three years prior to the date of the purchase of your new home. 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 ow nership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
CAN HOMEBUYERS PURCHASE A HOME FROM A STEP-RELATIVE AND STILL BE ELIGIBLE FOR THE CREDIT?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
IF A PARENT (WHO WILL NTO LIVE IN THE PROPERTY) COSIGNS FOR THE MORTGAGE, WILL THEIR CHILD STILL BE ELIGIBLE FOR THE CREDIT?
Yes. Provided that the child meets the other requirements for the tax credit. | |
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