The First Time Homebuyer Credit is a credit available to taxpayers who purchase a primary residence during the period April 8, 2008 and December l, 2009. It is a result of the Housing and Economic Recovery Act of 2008 and the American Recovery Reinvestment Act of 2009. One important qualification is that you (and your spouse, if applicable,) cannot have owned a home for the three years prior to your purchase.
In addition to the requirement that the home be your primary residence, there are income limitations as well. No credit will be given if your adjusted gross income, for a married couple filing a joint return is $150,000 to $170,000. For other taxpayers, the qualifying range in order to qualify for the credit is between $75,000 to $95,000. The home cannot be used as a rental or vacation property.
For homes purchased in 2008, you will be required to repay the credit over a fifteen year period, in 15 equal, annual installments beginning with your 2010 income tax year. This requirement does not apply to home purchases made in 2009, in which no repayment is necessary.
The amount you will receive if you qualify for the credit is ten percent of the purchase price of the home, with a maximum allowable limit of $8,000.00 ($7,500.00 for homes purchased in 2008). You apply for the credit by filling out an IRS Form 5405 and submitting it with either your 2008 or 2009 tax return, whichever may apply in your case. The credit will be applied to your federal tax bill, reducing the amount owed, or if you do not owe any tax, the credit will be refunded directly to you.
Many Buyers have asked if the credit applies to seller financed transactions. The answer is you may claim the credit whether you obtain a traditional mortgage or if you utilize seller financing.
For up-to-the minute details of this credit plan, you can refer to the Internal Revenue Service website at www.irs.gov.
First Time Home Buyer Credit Summary
- Applies to a home purchase that closed after April 8, 2008 and before Dec. 1, 2009
- Applies only to homes used as a taxpayer’s principal residence
- Reduces a taxpayer’s tax bill or increases a refund, dollar for dollar
- Is fully refundable, even if you owe no tax
- The credit is claimed on IRS Form 5405
- For homes purchased in 2009 the credit does not have to be paid back, unless the home is not the taxpayer’s main residence within a three- year period following the purchase
- No vacation homes or rental properties qualify for the credit
- There are income limits which apply to qualify for the credit.
- The credit can only be claimed once the purchase has been completed. (close of escrow).