Homebuyer Tax Credit

Why is it important now?

Buying a home may be more affordable now

The Worker, Homeownership and Business Assistance Act of 2009 provides a tax credit for qualifying first-time homebuyers and long-time homeowners. You must enter into a binding contract to buy a principal residence before May 1, 2010 and close before July 1, 2010. The tax credit applies to eligible purchases of new or existing houses, condominiums, houseboats, and trailers. The purchase price cannot exceed $800,000.

First-time homebuyers may be able to save up to $8,000

If you buy a first-time principal residence within the required time period, you may be eligible to claim a federal tax credit of up to $8,000 or 10% of the purchase price. You may qualify as a first-time homebuyer if you have not owned a principal residence or main home for at least three years prior to the purchase of the new home. The home must be your primary residence for a minimum of three years after the purchase date to avoid a recapture of the tax credit.

Long-time homeowners may be able to save up to $6,500

Certain long-time homeowners who buy a replacement principal residence may qualify as first-time homebuyers under the new law and may be eligible for a tax credit of up to $6,500. You must have owned a previous principal residence for any consecutive five-year period within the eight-year period immediately preceding the purchase date of the replacement home. The home must remain your primary residence for a minimum of three years after the purchase date to avoid a recapture of the tax credit.

Eligible credits can lower your taxes dollar-for-dollar

The First-Time Homebuyer Tax Credit may allow you to lower your taxes owed dollar-for-dollar. If you are eligible for the tax credit but it exceeds your tax bill, the federal government will generally send you a refund. Eligible homebuyer tax credits can be claimed on IRS Form 5405, which must be filed by paper along with supporting documentation. The tax credit phases out for homes purchased after that date if Modified Adjusted Gross Income (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.

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WHBAA

Straight from the Source

Click here to read the full text of the Worker, Homeownership and Business Assistance Act of 2009. See pages 6–9 for details about the homebuyer tax credit.

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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.

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