Hopefully this will provide an added incentive to get people house hunting again.
So… who exactly qualifies? How does it work? How do you take advantage of this incredible tax credit?
So, how do you qualify to receive this tax credit?…
#1 You must be a first-time home buyer.
Well, sort of.
The definition of a first time homebuyer as far as this tax credit is concerned is “a buyer who has not owned a principal residence during the 3-year period prior to the purchase. For married taxpayers, the law tests the home ownership history of both the home buyer and his/her spouse.”
So you don’t have to be purchasing your first home ever, but just your first home in over 3 years.
#2 You must purchase your home in 2009.
There was a different first-time homebuyer tax credit for those who bought homes between April 9, 2008 and January 1, 2009. It reads:
The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year. Source
As for the future, there is no plan for a 2010 tax credit at this time. So if possible, it makes a lot of sense to purchase your home in 2009 to be able to take advantage of this one-time offer up to $8,000 that you don’t have to pay back!
#3 There are some income limitations.
A single prospective homeowner making $75,000 — or a couple making $150,000 — qualifies for the full $8,000 tax credit.
Above that income rate, the actual amount of the tax credit becomes incrementally smaller.
Furthermore, a single person making at least $95,000 or a couple making at least $170,000 do not qualify for this tax credit.
#4 The price of the home determines the actual amount of your tax credit.
Basically, “the tax credit is equal to 10% of the home’s purchase price — up to a maximum of $8,000.”
This means that if you buy a house for $80,000 or more, then you will get the $8,000 tax credit.
If you buy a less expensive house, then your tax credit will be less. For example, if your new home is $72,000, your tax credit would be $7,200.
How To Apply For This Tax Credit
To take advantage of the tax credit all you need to do is claim it on your federal tax return on your 2009 taxes.
You must complete IRS Form 5405, and then apply the amount to line 69 of your 1040 tax return.
You don’t need to do anything before buying the house (you may want to make sure you will qualify for the credit if you will be counting on it), but you will want to make sure the sale is completed before December 31, 2009.
For more information, check out the IRS First Time Homebuyers Credit.
I have been a certified tightwad since I became pregnant with my first child and decided to find a way to stay home with him. I enjoy sharing my experiences in my journey back to financial health and planning for a future — which will include sending 2 kids to college and early retirement.