Homebuyer Tax Credit

Frequently Asked Questions

What is the new homebuyer tax credit legislation?

The Worker, Homeownership and Business Assistance Act of 2009 extends and expands the homebuyer tax credit that was provided under the stimulus law and other previous laws. The tax credit is extended for eligible first-time homebuyers. It has also been expanded for certain long-time homeowners. The home must be purchased as your principal residence no later than April 30, 2010 and must close no later than June 30, 2010. The purchase price cannot exceed $800,000.

What is the tax incentive for first-time homebuyers?

The First-Time Homebuyer tax credit applies to eligible purchases of principal residences on or before April 30, 2010. The purchase must close by June 30, 2010. In order to be eligible for the tax credit, you must not have owned a primary residence during the three-year period immediately preceding the purchase date of the new home. The maximum available credit is $8,000 or 10% of the purchase price. You must maintain the new home as your principal residence for a minimum of three years after the purchase date to avoid having to repay the tax credit.

What is the tax incentive for repeat homebuyers?

Certain repeat homebuyers, or "long-time homeowners," may also qualify for a homebuyer tax credit of up to $6,500. You must buy a replacement primary residence on or before April 30, 2010 and close by June 30, 2010. To qualify as a long-time homeowner, you must have owned a previous principal residence for any consecutive five-year period during the eight-year period preceding the purchase date of the replacement home. You must maintain the new home as your principal residence for a minimum of three years after the purchase date to avoid a recapture of the tax credit.

Do I qualify for the homebuyer tax credit?

To qualify as a first-time homebuyer, you must meet all of the following criteria:

  • The taxpayer, whether a single- or joint-filer, must not have owned any other home during the three years prior to the purchase date of the new residence
  • Your Modified Adjusted Gross Income (MAGI) cannot exceed certain limits
  • The home must be in the United States
  • The purchase price cannot exceed $800,000
  • You must enter into a binding purchase contract on or before April 30, 2010
  • The purchase must close no later than June 30, 2010
  • If you build your home, the purchase date is the move-in date
  • The home must remain your primary residence for at least three years

To qualify as a long-time homeowner, you must meet all of the following criteria:

  • The taxpayer, whether a single- or joint-filer, must have owned a primary residence for any consecutive five-year period during the eight-year period immediately preceding the purchase date
  • Your Modified Adjusted Gross Income (MAGI) cannot exceed certain limits
  • The home must be in the United States
  • The purchase price cannot exceed $800,000
  • You must enter into a binding purchase contract on or before April 30, 2010
  • The purchase must close no later than June 30, 2010
  • If you build your home, the purchase date is the move-in date
  • The home must remain your primary residence for at least three years

When do I have to buy a home to qualify for the tax credit?

To be eligible for the tax credit, you must enter into a binding purchase contract before May 1, 2010 and close before July 1, 2010.

How much is the tax incentive worth?

The tax credit for eligible first-time homebuyers is a maximum of $8,000 or 10% of the purchase price. For eligible long-time homeowners who buy a replacement principal residence, the maximum tax credit is $6,500. The purchase price cannot exceed $800,000. Consult your tax advisor for more details.

What are the income limitations for the tax credit?

If the qualifying home was purchased on or before November 6, 2009, there is a phase-out of the tax credit if your Modified Adjusted Gross Income (MAGI) is between $75,000 and $95,000 for single-filers, or between $150,000 and $170,000 for married joint-filers.

If the qualifying home is purchased after November 6, 2009, higher income limitations apply. The phase-out will apply if your MAGI is between $125,000 and $145,000 for single-filers, or $225,000 and $245,000 for joint-filers. Consult your tax advisor for more details.

How does the tax credit work?

The homebuyer incentive is a tax credit. A tax credit may lower your taxes owed dollar-for-dollar, up to the maximum level allowed. You must have purchased a qualifying principal residence and your Modified Adjusted Gross Income (MAGI) cannot exceed the limits shown in the previous answer. If the amount of your tax credit exceeds your taxes owed, you will generally be issued a refund.

Do I have to repay the tax credit?

Generally, no. The homebuyer tax credit does not have to be repaid as long as you maintain the home as your principal residence for at least three years after the purchase date. If you sell the home, convert it to rental or business property, or the home is condemned or ruined, there may be a recapture of the tax credit. Consult your tax advisor or review IRS Form 5405 for further details.

How do I claim the tax credit?

Eligible homebuyer tax credits can be claimed on IRS Form 5405. Under new IRS rules, you must file by paper and submit supporting documentation. If the qualifying home was purchased in 2009, you can claim the tax credit on either your 2008 or 2009 federal return. You may be able to file an amended return to claim the credit for the 2008 taxable year. If the qualifying home was purchased in 2010, you can claim the credit on either your 2009 or 2010 federal return. For help estimating the amount of your tax credit, review IRS Form 5405 or consult your tax advisor.

Where can I get more information?

  • To read the full text of the homebuyer tax credit in the Worker, Homeownership and Business Assistance Act of 2009, click here and go to page 6
  • Click here to read information from the IRS
  • To use the Homebuyer Savings Estimator tool, click here
  • Consult your tax advisor for advice specific to your circumstances
BackNext
---
| |
---
---
| |
---

The information contained herein is drawn from sources that are believed to be reliable, but it cannot be guaranteed as to completeness or accuracy. The content is not intended to be, and should not be relied upon as, tax, legal, or financial planning advice. Consult your tax advisor for specific advice.

Copyright © 2009-2017 Finity Communications, Inc. All Rights Reserved.
Terms of Use | Privacy Policy