Home Buyer Tax Credit Expires Soon, Do You Qualify?

Home Buyer Tax CreditThe federal home buyer tax credit is an exceptional way to take advantage of home ownership in today’s market. First time home buyers, by law defined as a buyer who has not owned a principal residence during the three-year period prior to this purchase, are eligible to claim the $8,000 tax credit. Existing home owners or repeat home buyers who have owned and resided in the same home for at least five consecutive years out of the last eight years, are eligible to claim the $6,500 tax credit. Note: The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000 for first time home buyers or $6,500 for repeat home buyers.

To qualify for the federal home buyer tax credit, you must purchase a home for $800,000 or less as a principal residence by April 30, 2010. However, home purchases with a binding sales contract signed by April 30, 2010 will still qualify for the federal home buyer tax credit provided you close by June 30, 2010. The types of homes that will qualify for the tax credit include single family detached homes, townhomes, condominiums, manufactured homes, and houseboats. Note: Vacation homes and rental properties will not qualify.

Of course anything with the IRS has some sort of income limits. Income limits of $125,000 for individuals and $225,000 for married couples filing jointly apply to all sales occurring after November 6, 2009. The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009 are $75,000 for individual taxpayers and $150,000 for married couples filing jointly.

The federal home buyer tax credit is refundable, which means that if the amount of income taxes you owe is less than the credit amount you qualify for, the IRS will send you a check for the difference. For example, if a first time home buyer who qualifies for the full $8,000 tax credit owes $2,000 in federal income taxes, they will receive a $6,000 check from the IRS ($8,000 minus $2,000 owed). Although the tax credit is a true credit, it will have to be repaid if you sell the home or stop using the home as your principal residence within three years after the purchase. All qualified home buyers can file the tax credit on their 2009 or 2010 income tax return with a copy of the HUD-1 settlement statement and IRS Form 5405.

11 Responses to “Home Buyer Tax Credit Expires Soon, Do You Qualify?”

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