When Congress opted to extend the home buyer tax credit on November 6, 2009, the credit was no longer a “first time” buyers credit.
Under the program’s new terms, first-time buyers are eligible for up to an $8,000 in tax credit. Those already owning a home ( ”long-time” homeowner) get up to a $6,500 credit. A “long-time” homeowner, according to the IRS, is someone who has used a home as a primary residence for at least 5 consecutive years dating back to 2002. This is an important qualifier for existing homeowners.
Do you plan to claim the Home Buyer Tax Credit in 2010? If yes, here are some critical facts you need to know.
- First, you need to know that the tax credit is a Federal tax credit. Doesn’t matter whether you live in Albokon, Hoboken, or Snowboken. If you file Federal taxes, you’ve gotten past first base.
- Second, you need to know the deadlines. In order to claim the Home Buyer Tax Credit, you must be under contract for your new home no later than April 30, 2010 and you must close on your new home between November 7, 2009 and June 30, 2010.
- Third, you need to know what types of homes are excluded from the program by the IRS.
The home may not be acquired from a mother, father, spouse, or child
The home may not be acquired from an entity in which you’re a majority owner
The home’s primary buyer must be at least 18 years of age
The home’s purchase price may not exceed $800,000
The home may not be acquired by gift or inheritance - The maximum tax credit as authorized by Congress is up to $8,000 for first-time home buyers and up to $6,500 for long-time homeowners. But not everyone will get the full credit. The tax credit is limited to a maximum of 10% of the home’s purchase price. Also, the tax credit is tied to the buyer’s adjusted gross income. If you file as a single person and your income is less than $125,000, you will receive the maximum credit. Same for joint-filers with income below $225,500. However, in households where income exceeds these limits, the credit will be reduced.
- Last, not least – the home you buy will have to be your primary residence and you must use it as your primary home for at least 3 years or you may have to repay the credit
If this information leaves you asking more questions, visit this IRS page for some frequently asked questions and answers.
Please seek out a qualified accountant or tax adviser if you have specific questions.
But for anything else, give me a call.
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{ 2 comments… read them below or add one }
I didn’t know 8,000 wasn’t for all homes. Everybody talks about 8,000 as if that’s what people get. If I buy a 50,000 house, I only get 5,000? My realtor said something different.
I was confused by that at first. Maybe people use the $8000 figure because most homes cost more than $80,000 and therefore most buyers will be entitled to the max credit.
If a realter told you this wasn’t so, then that person is wrong. Go to the irs link in this post here and you can read the rules. Can’t dispute the irs.