BUYING: HOME BUYER TAX CREDITS

ATTENTION:  Effective Immediately:  The $8000 first-time home buyer tax credit, originally set to expire on November 30th, 2009 has now been extended until April 30th, 2010.  As part of this same legislation, a new $6500 tax credit is now available for existing homeowners.

First-time Home Buyer $8,000 Tax Credit FAQ's

  1. Who is eligible to take advantage of the First-time Home Buyer $8,000 tax credit?

  2. What is the definition of a first-time home buyer?

  3. I am currently married and I have never owned my own home but my husband purchased his home two years ago, before we were married. Can I still qualify as a first-time home buyer and take advantage of this program?

  4. I am a first-time home buyer but I do not qualify for a home loan without a co-signer. My co-signer is NOT a first-time home buyer. Under these circumstances, do I still qualify for the first-time home buyer tax credit?

  5. Are there income limits when qualifying for this program?

  6. I am not sure if I will be purchasing a single family home or a townhome.  What types of properties will qualify for this tax credit?

  7. How do I claim the tax credit?

  8. What is a tax credit?

  9. Am I required to pay back the credit for the home I purchased?

    10.

Existing Homeowner $6,500 Tax Credit FAQ's

  1. Who is eligible to take advantage of the $6500 tax credit for Existing Homeowners?

  2. What is the definition of a qualifying Existing Homeowner?

  3. Does my new home have to fall within a certain price range?

  4. I owned my home for 10 years, but sold it two years ago and have been renting since. If I purchase a home, will I be elibile for the $6500 tax credit if I meet all other eligibility requirements?

  5. Are there income limits when qualifying for this program?

  6. How do I claim the tax credit?

  7. What is a tax credit?

  8. Am I required to pay back the credit for the home I purchased?

    9.
Who is eligible to take advantage of the $8,000 tax credit?
First-time home buyers purchasing a primary residence, new or resale, are eligible for the tax credit. A binding contract for purchase must be completed on or before April 30, 2010 and the purchase must close on or before June 30, 2010.

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What is the definition of a first-time home buyer?
The law defines a first-time home buyer as a buyer who has not owned a principal residence during the three-year period prior to the purchase. 

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I am currently married and I have never owned my own home but my husband purchased his home two years ago, before we were married. Can I still qualify as a first-time home buyer and take advantage of this program?
No. The law tests the homeownership history of both the buyer and his or her spouse. Both parties must qualify as a first-time home buyer as defined above.

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I am a first-time home buyer but I do not qualify for a home loan without a co-signer. My co-signer is NOT a first-time home buyer. Under these circumstances, do I still qualify for the first-time home buyer tax credit?
Yes. You would qualify for the first-time home buyer tax credit as long as you, the first-time home buyer, will occupy the property as your primary residence.

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Are there any income limits when qualifying for the first-time homebuyer or existing homeowner tax credits?
Yes. For purchases made after November 6, 2009, the income limit for single home buyers is a Modified Adjusted Gross Income (MAGI) of $125,000 per year.  The income limit for married couples is a Modified Adjusted Gross Income of $225,000 per year.

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I am not sure if I will be purchasing a single family home or a townhome.  What types of properties will qualify for this tax credit?
Any home purchased by an eligible first-time home buyer will qualify, provided that the home will be used as a principal residence (the home where you spend 50% or more of your time).  This includes single-family detached homes, attached homes (like townhouses), condominiums, manufactured or mobile homes, and houseboats.

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How do I claim the tax credit?
There are no applications or forms to fill out prior to making your purchase. You simply claim the tax credit on your federal income tax return.

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What is a tax credit?

A tax credit is a dollar-for-dollar reduction in what the taxpayer owes to the IRS. 

First-time Home Buyer Example: If you owe $2,000 on your federal tax return, your tax credit would be $6,000 ($8,000 minus $2,000).  Conversely, if you are due a tax refund of $2,000, the total amount due back to you from the IRS would be $10,000 ($8,000 plus $2,000).

Existing Homeowner Example: If you owe $2,000 on your federal tax return, your tax credit would be $4,500 ($6,500 minus $2,000). Conversely, if you are due a tax refund of $2,000, the total amount due back to you from the IRS would be $8,500 ($6,500 plus $2,000).

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Am I required to pay back the credit for the home I purchased?
Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009. The obligation to repay the credit on a home purchased in 2009 and before April 30th, 2010 arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the tax return for the year the home ceased being your principal residence.

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Who is eligible to take advantage of the $6500 tax credit for Existing Homeowners?
Any qualifying existing homeowner that enters into a binding contract to purchase a home for their principal residence on or before April 30th, 2010 and closes on or before June 30, 2010.

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What is the definition of a qualified existing homeowner?
If you have owned a principal residence for five consecutive years of the last 8 years, you are considered an existing homeowner.

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Does my new home have to fall within a certain price range?
Yes. The purchase price of the home must be at or below $800,000. A purchase price above $800,000 makes the home ineligible for any portion of the credit.
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I owned my home for 10 years, but sold it two years ago and have been renting since. If I purchase a home, will I be eligible for the $6,500 tax credit if I meet all the other eligibility tests?
Yes. You have lived in the home for more than 5 consecutive years of the previous 8 years.
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For more information, visit the IRS website.

The information contained in this website pertaining to both the $8,000 first-time home buyer tax credit and the $6,500 existing homewoner tax credit is preliminary and based on the information available at this time. For this reason, this information is subject to change.