 | Wess Galyon is President and Chief Executive Office of the Wichita Area Builders Association which is the largest building industry trade association in the state of Kansas. He has been with the Association in this capacity since 1986 and represents the interests of builders and associates from his local association. Wess can be reached at his office, 316-265-4226. For more information, go to www.wabahome.com. |
Home Improvement
2009-04-01 14:39:00
First time home buyer tax credit
Answer: In its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for first-time home buyers.
But time is of the essence for buyers who want to take advantage of this opportunity. Only homes purchased on or after January 1, 2009 and before December 1, 2009 are eligible.
Who is Eligible?
•The $8,000 tax credit is available for the first time home buyers only.
•The law defines “first time home buyer” as a buyer who has not owned a principal residence during the three year period prior to the purchase.
•All U.S. citizens who file taxes are eligible to participate in the program.
Payback Provisions
•The tax credit is a true credit. It does not have to be repaid.
•The only replacement requirement is if the home owner sold the home within three years after the purchase.
Income Limits
•Home buyers who file as single or head of household taxpayers can claim the full $8,000 credit if their modified adjusted gross income (MAGI) is less than $75,000.
•For married couples filing a joint return, the income limit doubles to $150,000.
•Single or head of household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first time home buyer tax credit.
•Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first time home buyer tax credit.
•The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples with a MAGI that exceeds $170,000.
Effective Dates for the Tax Credit
•First time home buyers would receive an $8,000 tax credit for the purchase of any home on or after January 1, 2009 and before December 1, 2009. To qualify, you must actually close on the sale of the home during this period.
Tax Credit is Refundable
•A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference.
•For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government.
•If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from the home buyer tax credit).
•Buyers can take the tax credit on their 2008 and 2009 income tax return.
Types of Homes that Qualify for the Tax Credit.
•All homes, whether single family, townhomes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a principal residence in the prior three years. This also includes newly-constructed homes.
Who is eligible to claim the tax credit?
•Answer: First time home buyers purchasing any kind of home – new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
What’s the definition of a first time home buyer?
•Answer: The law defines “first time home buyer” as 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 homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first time home buyer.
How is the amount of the tax credit determined?
•The tax credit is equal to 10% of the home’s purchase price up to a maximum of $8,000.
Are there any income limits for claiming the tax credit?
•The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGI’s between these amounts.
