Home Buyer Federal Tax Credit Facts
Who is eligible?
* First-time home buyers, who are defined by the law as buyers who have not owned a principal residence during 3 year period prior to the purchase, may be eligible for a tax credit of 10% of the home purchase price, up to a maximum of $8,000
*Existing home owners who have been residing in their principal residence for 5 consecutive years out of the last 8 and are purchasing a home to be their principal residence (”repeat buyer”), may be eligible for a tax credit of 10% of the home purchase price, up to $6,500.
* All U.S. citizens who file taxes are eligible to participate in the program.
Income Limits
* Home buyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
* For married couples filing a joint return, the combined income limit is $225,000.
* Single or head-of-household taxpayers who earn between $125,00 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
* The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
Effective Dates
* The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.
Types of Homes that Qualify
* All homes with a purchase price of less than $8,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.
Tax Credit is Refundable
*A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for , the government will send you a check for the difference.
* For example:
A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receinve a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 tax credit)
A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 tax credit).
All qualified home buyers can take the tax credit on their 2009 or 2010 income tax return.
Payback Provisions
* The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within 3 years after the purchase.
