The First Time Home Buyer Tax Credit Basics
This is a dollar for dollar credit you get on your taxes at the end of the tax season the year you buy your first home. Dollar for dollar means, there is no formula of deduction where you hear some nice big pretty number of $8,000 and then you get a small percentage of that in cash with your tax refund. If you qualify for all $8,000, that will be the amount directly added on to your end of the year tax refund. If you get $2,500 at the end of the year and qualify for say, $2500 in First Time Buyer Tax Credit, then you’ll get $5,000.
Please see my previous Blog called “Housing and Economic Act and Tax Credit…”about this tax credit from it’s original inception, and then read on below here to see how it has evolved to a great opportunity for First Time Buyers in the year of 2009.
Here are the details of the Tax Credit. There are listed below the “Original Version” and “Updated Version”. There were changes made that made this credit a lot more opportunistic for Americans, and that is the “Updated Version” to each of the guidelines I’ve listed below.
Amount of Credit
Original Calculation: Lesser of 10 percent of cost of home or $7500
Updated Version: Maximum credit amount increased to $8000
All principal residences eligible.
Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.
Purchasers will continue to receive refund for unused amount when tax return is filed.
Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000).
First-time Home buyer Only
Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
No change. Still available for first-time purchasers only. Three-year rule continues to apply.
Original: Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.
Updated Version: No repayment for purchases on or after January 1, 2009 and before December 1, 2009
Recapture- (means that if you do the below…sell the home, there could be within the guidelines stated here, a requirement for you to pay back the tax credit.)
Original: If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.
Updated Version: If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.
Feel free to call me for more specifics. Brad Lynch 469-450-2723