We’ve had lots of questions regarding the new $8000 first time homebuyer’s tax credit, so I wanted to provide the basic overview:
If you know anyone who qualifies as a first time home buyer, they may be eligible for a large tax credit in 2009. The new stimulus bill, the American Recovery and Reinvestment Act, signed by President Barack Obama on February 17, 2009, updates the previous First Time Home Buyer Credit of 2008.
Some important changes include:
- No repayment for the 2009 credit if you do not sell before 3 years
- Maximum credit increase from $7,500 to 8,000 or 10% of the purchase price of the home (whichever is smaller)
- Qualifying dates include homes bought between January 1, 2009 and before December 1, 2009
- First time home buyer is defined as someone who has not owned a principal residence in 3 years
- Income limits apply, but those earning more than the limits may qualify for a reduced credit
The income restrictions are based on the Adjusted Gross Income (AGI) on your tax return.
Income restrictions include:
- Individuals/Single Head of Household – income no more than $75,000
- Married couples filing Joint return – income no more than $150,000
The 2009 First-Time Homebuyer Tax Credit is claimed on IRS Form 5405 and filed with your 2009 federal tax return. Tax forms can be found at www.irs.gov.
**UPDATE** As of May 29th, first time home buyers can use the credit toward closing costs and more. Read all about it here.