Dennis Norman
Time is running out for first time home buyers to take advantage of the $8,000 first-time home buyer credit which,absent an extension from Congress,will expire December 1,2009.
According to the IRS,1.4 million families to date have taken advantage of the tax credit. If you have buyers or potential buyers for your homes that may be eligible for the credit,now is the time to get them to pull the trigger,time is running out!
In an effort to help educate and inform buyers and potential buyers about the credit,qualifying for and claiming it, the IRS set up a website and has even published a video on YouTube to help get the message out (I have posted the video below). I would suggest directing buyers to this video as well as the IRS website to see if the credit may help them buy a home.
For buyers to qualify for the credit they must complete their first-time home purchases before Dec. 1st. The credit of up to $8,000 is generally available to home buyers with qualifying income levels who have never owned a home or have not owned one in the past three years.
The credit cannot be claimed until after the purchase is completed. For purchases made this year before Dec. 1,taxpayers have the option of claiming the credit on their 2008 returns or waiting until next year and claiming it on their 2009 returns.
For those considering a home purchase this fall,here are some other details about the first-time home buyer credit:
- The credit is 10 percent of the purchase price of the home,with a maximum available credit of $8,000 for either a single taxpayer or a married couple filing jointly. The limit is $4,000 for a married person filing a separate return. In most cases,the full credit will be available for homes costing $80,000 or more.
- The credit reduces the taxpayer’s tax bill or increases his or her refund,dollar for dollar. Unlike most tax credits,the first-time home buyer credit is fully refundable. This means that the credit will be paid to eligible taxpayers,even if they owe no tax or the credit is more than the tax owed.
- Only the purchase of a main home located in the United States qualifies. Vacation homes and rental properties are not eligible.
A home constructed by the taxpayer only qualifies for the credit if the taxpayer occupies it before Dec. 1,2009. - The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on the taxpayer’s modified adjusted gross income (MAGI). MAGI is adjusted gross income plus various amounts excluded from income—for example,certain foreign income. For a married couple filing a joint return,the phase-out range is $150,000 to $170,000. For other taxpayers,the range is $75,000 to $95,000. This means the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.
- The credit must be repaid if,within three years of purchase,the home ceases to be the taxpayer’s main home. For example,a taxpayer who claims the credit based on a qualifying purchase on Sept. 1,2009,must repay the full credit if he or she sells the home or converts it to business or rental use at any time before Sept. 1,2012.
Taxpayers cannot take the credit even if they buy a main home before Dec. 1 if:
- The taxpayer’s income is too large. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
- The taxpayer buys a home from a close relative. This includes a home purchased from the taxpayer’s spouse,parent,grandparent,child or grandchild.
- The taxpayer owned another main home at any time during the three years prior to the date of purchase. For a married couple filing a joint return,this requirement applies to both spouses. For example,if the taxpayer bought a home on Sept. 1,2009,the taxpayer cannot take the credit for that home if he or she owned,or had an ownership interest in,another main home at any time from Sept. 2,2006,through Sept. 1,2009.
- The taxpayer is a nonresident alien.
For details on claiming the credit,see Form 5405,First-Time Homebuyer Credit.
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