Thinking about taking advantage of the $8000 tax credit now available to first-time home buyers?  Kim has all the answers to your important questions about buying a home and receiving a big tax break!

• "Am I eligible?"
• "How does it work?"
• "How big is the tax credit?"
• "What about repayment?"
• "Are there income limits?"
• "How is my income determined?"
• "How do I claim the tax credit?"
• "Is there a way to access the money sooner than waiting to file my taxes?"

Buying A First Home Is A BIG STEP!

The commitment to purchase a home is a substantial one and Kim encourages you as a first-time buyers to ask questions and be informed about the decision you are making so that the home you buy is one you will enjoy for years to come!

Fortunately, Kim is an experience professional who is willing and able to help you through the entire process.  The home buyer tax credit and more affordable prices make now an especially opportune time to purchase!

• Purchases by non-resident aliens are not eligible.
• 2009 purchases financed by proceeds from a qualified mortgage issue are now available.
• Any single family residence located in the US that will be used as a principle residence is eligible.  Generally, this is the place where an individual spends most of his/her time.  This includes single-family detached housing, condos or coops, townhouses or any similar type of new or existing dwelling.
• The credit will not result in an individual owing additional federal taxes under the Alternative Minimum Tax.
• Home purchases between relatives and other types of residences are not eligible for the credit.
• Other tax benefits of home ownership are still in place.  The mortgage interest deduction, capital gains tax exclusion, and property tax deduction are some well-known examples.

"Am I eligible?"

First-time home buyers who purchase a principle residence on April 9, 2008 and before December 1, 2009 are eligible.  If you (and your spouse, if married) have not owned your principle residence for a 3-year period before your purchase, and you have never taken advantage of the DC first-time home buyer credit, you qualify as a first-time home buyer.

"How does it work?"

Like all tax credits, it will DIRECTLY REDUCE THE TOTAL AMOUNT OF TAXES YOU OWE.  When you file your taxes, for the year you purchased your home (2008 or 2009), you will be able to subtract the amount of the credit from your Federal income tax liability, increasing the size of your refund or reducing the amount you owe.  For example, you file your 'normal' tax return and find that you owe $2,000 in taxes.  With this credit, your tax liability could be lowered by $8,000 - which means, you instead get a $6,000 tax REFUND check from IRS.

"How big is the tax credit?"

THE TAX CREDIT IS EQUAL TO 10% OF THE PURCHASE PRICE OF YOUR HOME UP TO $8,000.  The credit passed in 2008 was limited to $7,500 and that limit still applies to homes purchased in 2008.  The full credit is available for single individuals whose adjusted gross income is less than $75,000 and your home purchase qualifies you for the full credit, the credit phases out according to the dollar amount (or percentage if less than $8,000) in the chart below. 

For married couples filing jointly, the credit begins to phase out at an adjusted gross income of $150,000.  The dollar amounts in the chart below corresponds to a phase out of the full tax credit (percentages are for credits less than $8,000).

"What about repayment?"

The American Recovery and Reinvestment Act of 2009 made a big change to the credit by removing the repayment provision for credits on homes purchased in 2009.  Previously, the tax credit had a payback provision that made it similar to an interest free loan that would have been paid back in full over 15 years (repayment) or at the time of resale (recapture) unless the home was sold at a loss.  While the repayment provision is completely gone from the updated credit, a more mild recapture provision remains.  If you well your home within 3 years of purchase, the entire amount of the credit is recaptured, that is, the government takes it back.

"Are there income limits?"

Yes.  The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return.  Individuals filing Form 1040 as Single (of Head of Household) are eligible for the credit if their income is not more than $75,000.  Married couples who file a Joint return may have income of no more than $150,000.  See the charts for 'Individuals' and 'Married Couples' above.

"How is my income determined?"

For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return.  AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements.  AGI is the number that appears on the bottom line of the front page of an IRS form 1040.

"How do I claim the tax credit?"

There is no pre-purchase authorization, application or similar approval process.  All eligible purchasers simply claim the credit on their IRS Form 1040 tax return.  The credit will be reflected on a new Form 5405 that will be attached to the 1040.  Form 5405 can be found at www.irs.gov.

$8000 tax credit info.docx

2009 tax credit sales page.docx

Chart for 2009 Tax Credit (2).pdf

FAQ Tax Credit.pdf

IRS Filing Guidance for First-Time Homebuyers Tax Credit.docx

IRS Form - First-Time Homebuyer Credit.pdf

NAR 2009 Tax Credit Presentation.pdf

 

"Is there a way to access the money sooner than waiting to file my taxes?"

 

For more specific questions about the tax implications of the credit, please consult a tax professional.