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$8000 Home Buyer Tax Credit Basics (American Recovery & Reinvestment Act 2009) There are questions about who will qualify for the $8000 maximum tax credit for first-time homebuyers. The tax credit is only for homes purchased by first-time homebuyers between January 1 and December 1, 2009.....ONLY during these 11 months! You as the client should always seek legal and tax advice from a professional. 1. Who Is Considered a First-Time Home Buyer? There are other scenarios to consider! This one is easy, anyone who has not owned a home within the last 3 years. If they sold a home 3 years ago, the date on the HUD 1 is the determining factor. For a married couple, if one person owned a home within the last 3 years and the other did not, they don't qualify for the tax credit. However, if an unmarried couple jointly buys a home, and one person owned a home (within 3 years) and the other did not, they can designate the tax credit to that person who will be able to claim it on their individual tax return. This rule also applies for parents to co-sign on a mortgage. The parents own a home. The son or daughter is FTHB, the child can claim the tax credit. A non-US citizen, who meets resident-alien status (defined by the IRS Publication 519) is also eligible as long as they meet the requirements above and income limits. 2. Types of Homes Many type of homes qualifies as long as it is a principal residence (as defined by the IRS). Single family, town homes and condos, manufactures or mobile homes and yes, houseboats may also qualify! A newly constructed home purchased from a homebuilder is determined by the date on the HUD 1. 3. Is It a Tax Credit Or a Loan? If someone purchased a home between April 9 and December 31, 2008, they called it a tax credit because you get the tax credit money upfrontbut it really was an interest-free loan which is paid back for the next 15 years or upon the sale of the home (within 3 years of purchase). The payback is based upon the balance owed and not the entire tax credit received. The next set of rules applies if a home is purchased between January 1 and December 1, 2009. It is a true tax credit and does not have to be repaid. However, if the home is sold within 3 years of the purchase date, the entire tax credit has to be paid back. 4. How Is The Dollar Amount of Tax Credit is Figured? Simply calculation here: 10% of the homes purchase price or a maximum of $8000. A tax credit can be claimed regardless if they obtain a mortgage, a tax-revenue mortgage or the buyer paid cash when purchasing the home. 5. Income Limits This is a little more complicated and first-time homebuyers should seek advice from a tax expert. Here is the simple explanation based on several scenarios but keep in mind that the magic income number is always based on Modified ADJUSTED GROSS INCOME (MAGI). You will find that the MAGI income on the following lines of the 3 tax forms. IRS 1040 Form - line #37 IRS Form 1040A - line 21 IRS1040EZ - line 4 Single taxpayer: MAGI of $75,000 or less Married taxpayer: MAGI of $150,000 or less However, there is a provision for those singe and married who EXCEED the income limits to claim a partial tax credit. A tax credit formula has been created to determine the dollar amount. For example, if a single tax payers MAGI is $82,000, they could get a partial tax credit of $5200. Now, heres the biggie: Taxpayers can choose to claim their tax credit on either their 2008 tax returns or wait until the 2009 tax year to file. For example, if they exceed the income limit in 2008 (which would only qualify them for a partial credit) but their income has been decreased in 2009 due to a temporary layoff or cut back in over time, they can wait until 2009 to claim the tax credit (for the full tax credit). 6.Miscellaneous For home buyers who do not want to wait until the end of the year to claim their tax credit, they should consider filing a W-4 form with their employer, decreasing the amount withheld for federal taxes. They may not get a check at the end of the year, but it will increase the dollar amount of their paycheck. Another option for FTHBs is to borrower the dollar amount of the expected tax credit from a relative (usually a parent) and pay it back when the tax credit is received. It could be used towards down payment and closing costs and FHA and VA will allow it. Be sure to check with the lender and the documentation required. This is more complicated than it seems on the surface. Always, always, talk with your tax advisor! Quotes from... Copyright 2009 ApartmentToolKit.com.                                                        

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