A Sweet Deal for Homebuyers The ins-and-outs of the Homebuyer Tax Credit
If you are – like many Americans – trying to figure out the best time to make your first home purchase, then you may want to take a closer look at the first-time homebuyer tax credit that has been expanded to current homeowners as well. CREDIT AMOUNTS First-time homebuyers: The credit is equivalent to 10 percent of the purchase price of the home up to $8,000. Current homeowners: The credit is equivalent to 10 percent of the purchase price of the home up to $6,500. OTHER IMPORTANT NOTES REGARDING THE CREDIT 1. Qualifying for the homebuyer credit As it relates to this credit, a first-time homebuyer is defined as any taxpayer who has not owned a principal (or main) residence for a period of three years prior to the home purchase. Current homebuyers must have used the home being sold as a principal residence for at least five of the previous eight years. The purchase must be of a principal residence. 2. Income limitations First-time buyers: Single filers with modified adjusted gross income of $75,000 or less and married couples with MAGI of $150,000 or less are eligible for the full $8,000 credit. Current homeowners: Single filers with modified adjusted gross income of $125,000 or less and married couples with MAGI of $225,000 or less are eligible for the full $6,500 credit. 3. Purchase window The 2009 homebuyer tax credit is retroactive to January 1, 2009 and covers purchases through April 30th, 2010. 4. Refundable credit The tax credit reduces your final tax liability and you will be refunded whatever portion, if any, of the credit that remains after applying the credit to taxes you owe for that year. For example, let’s say you qualify for the full $8,000 first-time homebuyer credit and your total tax liability (after withholding) is $2,000. Your tax liability will be zero, and you will receive a refund for the remaining $6,000. 5. Purchase limitations The tax credit is limited to purchased homes up to $800,000. 6. Claiming the credit Claiming the credit is actually very simple. To take advantage of the first-time homebuyer credit, you’ll need to complete IRS Form 5405 which will help determine the tax credit amount. You’ll then claim that amount on line 69 of your 1040 tax return form. No pre-approval forms or applications are required! As with most issues related to a home purchase, be sure to consult with your RealEstate.com REALTOR® for additional information or to ensure that you and your prospective purchase qualifies for this homebuyer tax credit.
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