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Buy a Home, Get a Tax Credit
Buy a Home, Get a Tax Credit
through April 2010
Not only is it one of the best buyers’ markets in years, but a tax credit of up to $8,000 for first-time buyers -- and up to $6,500 for long-time homeowners – could mean extra money in your pocket!
Who can use the homebuyer tax credit?
First-time buyers and long-time homeowners who buy a replacement principal residence. The law defines afirst-time buyer as an individual who has not owned a home in three years prior to the day of purchase. According to the IRS, the long-time homeowner must have lived in the same principal residence for any five consecutive-year period that ended on the date the replacement home is purchased.
How much is the credit?
For first-time buyers the credit is equal to 10 percent of the cost of the home up to a maximum of $8,000 (or $4,000 for a married individual filing separately). For long-term homeowners, the credit is equal to 10 percent of the purchase price up to $6,500 (or $3,250 for a married individual filing separately).
What is the deadline for using the tax credit?
Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence
on or before April 30, 2010 and close on the home buy June 30, 2010.
What is the deadline for military service members?
The credit is extended through May 1, 2011, for members of the military serving outside the United States for at
least 90 days.
Which properties are eligible?
Any single-family home (including condos, co-ops, townhouses) that will be used as a taxpayer’s principal residence. Vacation properties are not eligible; the tax credit may not be used to purchase a home for more than $800,000.
Are there income limits?
People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009. The credit phases out for individual tax payers with modified adjusted gross income between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers.
How do I claim the tax credit?
For qualifying purchases, taxpayers have the option of claiming the credit on either their 2009 or 2010 return. The credit reduces a taxpayers’ tax bill or increases his or her refund, dollar for dollar. It is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed. The credit is claimed using IRS Form 5405.
Does the credit have to be repaid?
No, as long as the buyer stays in the home for at least three years. If the home is sold within three years of the date of purchase, the buyer is required to pay back the full amount of the credit, including any refund received.
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