In November 2009, an extension and expansion of the previous tax credit for purchases of a primary residence was passed.
Especially valuable is the First Time Buyers Tax Credit of up to $8,000. Are you looking to buy your first home?
There are plenty of good reasons to buy a home. These include a continuing low mortgage rate, significant reductions in house prices and a large choice of inventory.
The basics of the Tax Credits are as follows:
First Time Buyers
- For Buyers who have not owned a home in the past 3 years
- A refundable tax credit of 10% of purchase price, up to a maximum of $8,000.
- For buyers who are existing home owners and who have lived in that home as a principal residence for 5 consecutive years in the past 8 years.
- A refundable tax credit of 10% to a maximum of $6,500.
- The existing home does not have to be sold, but the new purchase must become the primary residence.
Rules that Apply to Both Tax Credits
- For purchase of a principal residence only (not for second homes or investments).
- Must have ratified contract for purchase by April 30, 2010.
- Must settle on the purchase by June 30, 2010.
- Maximum qualifying income levels for the full credit are $125,000 for single tax filers and $225,000 for married people filing jointly. The credit is reduced on a sliding scale up to $145k and $245k respectively. Higher income levels are not eligible for the credit.
- Maximum qualifying purchase price $800,000
- For members of the military serving outside the US for at least 90 days, the tax credits will extend a further 12 months to June 30, 2011.
- Improved powers have been granted to the IRS to investigate possible fraudulent claims.
You will still need to qualify for your mortgage finance but there are still mortgages available for buyers with satisfactory credit.
How to Obtain Tax Credits
These tax credits are claimed from the IRS via your tax return. You have to complete IRS Form 5405. You cannot submit a claim until you have completed the purchase.
- If you have completed your purchase by November 30, 2009, you may either submit an amended 2008 tax return or claim the credit on your 2009 tax return.
- If you complete your purchase between December 1, 2009, and June 30, 2010, you may the claim the credit on your 2009 tax return or may delay it until your 1020 return if you wish.
Please call me or email me and let’s find you your new home.
Disclaimer: every attempt has been made to ensure this information’s accuracy. However, you should consult with a tax advisory to confirm your personal circumstances. Ultimately, your eligibility for a tax credit is between you and the IRS.