Congress Has Approved An $8,000 Tax Credit
For First-Time Home Buyers
Under the
American Recovery and Reinvestment Act of 2009
Frequently Asked Questions:
Q: How much is the credit?
A: The tax credit would be $8,000 or 10% of the purchase price,
whichever is lower.
Q: Is a tax credit the same as a tax deduction?
A: No. A tax credit is a dollar-for-dollar reduction in what the
taxpayer owes. That means that a taxpayer who owes $8,000
in income taxes and who receives an $8,000 tax credit would
owe nothing to the IRS.
Q: What type of purchase is eligible?
A: The $8,000 tax credit included in the 2009 economic stimulus
plan is available for the purchase of a principal residence by
first-time home buyers. This includes new or resale homes,
condos, townhouses and co-ops.
Q: What is the definition of a first-time home buyer?
A: 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. For married taxpayers, the law tests the
homeownership history of both the home buyer and his/her
spouse.
If one spouse has not owned a home in the past three years, but
the other spouse has owned a principal residence, neither spouse
will qualify for the first-time home buyer tax credit.
Q: When does the home have to be bought to qualify for the tax
credit?
A: To qualify for the tax credit, a home purchase must occur on or
after January 1, 2009 and before December 1, 2009.
Q: Who qualifies for the first-time home buyer credit?
A: According to the IRS, any taxpayer who has not owned a home
during the three years prior to the date of purchase can qualify for
the credit.
Q: Do home buyers have to repay the credit?
A: No; however, if the home is sold within three years of purchase,
the credit is reversed.
Q: Are there income limitations on the tax credit?
A: The tax credit begins to phase out for individuals with modified
adjusted gross income over $75,000 ($150,000 for joint filers).
Q: How do eligible first-time home buyers claim the tax credit?
A: Participating in the tax credit program is easy. Eligible home
buyers claim the tax credit on their federal income tax return.
Specifically, home buyers should complete IRS Form 5405 to
determine their tax credit amount, and then claim this amount
on Line 69 of their 1040 income tax return. No other applications
or forms are required, and no pre-approval is necessary.
Buyers should consult with a tax advisor regarding eligibility for tax credits.
Source: www.congress.org
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