First Time Home Buyer Tax credit of $8000 for 2009

President Obama has now signed into law the $787 billion economic-recovery package. Unfortunately certain tax breaks, including the homer buyer tax credit, were scaled back to $8,000 (from the proposed $15,000) to get sufficient support for the stimulus bill's approval. This is $500 more than the current home buyer tax credit (outlined below), but will only be available for qualifying home purchases this year between January 1, 2009 and December 1, 2009. Buyers who bought houses last year are still covered under the existing $7,500 home owner credit.

The Senate's proposal to make this credit available to anyone regardless of income was also dropped and like the original $7,500 home owner tax will phase out for single taxpayers with adjusted gross incomes that exceed $75,000 (or $150,000 for married couples filing jointly). Further, if you sell the home within three years, you’ll forfeit the credit (or have to pay it back it you already claimed it).

However, the final stimulus plan did leave in the key provision that would eliminate the repayment requirement for the tax credit for first-time home buyers. This means that the home buyer tax break is a true tax credit and not a deduction, so will be an actual $8000 reduction on your next tax bill. If you don't owe that much and purchased a house in the qualifying period, you get a check back from the IRS.

- To be eligible for the home buyer credit, your modified adjusted gross income (MAGI) must be less than $95,000 or $170,000 (if married filing jointly) for the relevant tax year. The phase-out of the credit begins when your MAGI exceeds $75,000 or $150,000 (married filing jointly), meaning the amount of credit received decreases after these limits.

- You cannot claim the credit if acquired your home by gift or inheritance OR if you acquired your home from a related person

- If you and your spouse claim the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit. So the total amount claimable is still $8000.

- [Recent Update] If you are married joint filers, both partners must meet the first-time home buyer criteria. This is to prevent double dipping, but is biased against married couples since single filers also get the $8000 credit. So if you are planning to get married this year to someone who has owned a home - you may want to buy a home first and get married in 2010.

- If two or more unmarried individuals buy a main home, they can allocate the credit among the individual owners using any reasonable method. The total amount allocated cannot exceed the smaller of $7,500 ($8,000 if you purchased your home in 2009) or 10% of the purchase price. Note: A reasonable method is any method that does not allocate all or a part of the credit to a co-owner who is not eligible to claim that part of the credit (I would go with 50/50 as a reasonable method if one person is not eligible for the credit)

- The purchase date is how you decide which credit you are eligible for. Only homes purchase from Jan 1 2009 to Dec 1 2009 are eligible for the fully refundable $8000 credit. If you constructed your main home, you are treated as having purchased it on the date you first occupied it.

written by Andy on Tuesday, February 10, 2009 from www.savingtoinvest.com


 

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