understanding the first time homebuyer tax credit
DESCRIPTION
In "A Complete Guide to Understanding the First Time Homebuyer Tax Credit reviews the $7,500 tax credit as well as the revisions signed into law on February 17th as part of H.R.1 - The American Recovery and Reinvestment Act of 2009TRANSCRIPT
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A Complete Guide to
Qualifying for and Understanding the First Time
Homebuyer Tax Credit
H.R. 3221 – Economic Stimulus and Housing Recovery Act of 2008 - $7,500H.R. 1 – American Recovery and Reinvestment Act of 2009 - $8,000 Revised
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The $7,500 First Time Homebuyer Tax Credit
• The original tax credit was introduced with H.R. 3221 - The Economic Stimulus and Housing Recovery Act of 2008
• 10% of the Purchase Price up to $7,500 for single and joint taxpayers
• Married filing separate may claim $3,750
• Purchased between April 8th 2008 and before July 1st 2009
• Interest Free loan paid back over 15 years beginning 2 years after credit is claimed
• Purchase loans using by Mortgage Revenue Bonds are ineligible for credit - CalHFA
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The $8,000 First Time Homebuyer Tax Credit
• H.R.1-The American Recovery and Reinvestment Act revises the First Time Homebuyer Tax Credit
• 10% of the Purchase Price up to $8,000 for single and joint taxpayers
• Married filing separate may claim $4,000
• Purchased after December 31st 2009 and before December 1st 2009
• Not paid back – No recapture if home is lived in as main home for at least 3 years
• Purchase loans using Mortgage Revenue Bonds are eligible for Homebuyer Credit - CalHFA
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IRS Guidelines - Qualifying for the Tax Credit
Occupancy and Property Type
• Must purchase a “main home” – Primary residence– Main home - Your main home is the one you live in most of
the time. It can be a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence
– New construction – Purchase date treated as first date you occupy home
• Must be a First Time Homebuyer– Can not have owned another primary home within 3 years
of the closing date of new home– May own other homes or properties as long as you have
never lived in it as your main home
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IRS Guidelines - Qualifying for the Tax Credit
Maximum income limits – Phase out maximums
• Married filing joint - $150,000 – Eligible for full credit– Phase out begins when MAGI exceeds limit – reduce credit
• Phase out at $195,000
• Single filing status - $75,000 – Eligible for full credit– Phase out begins when MAGI exceeds limit – reduce credit
• Phase out at $95,000
• Occupying home as Joint Tenants– If you purchase home under joint tenancy and down
payment and ownership are not equal• Tax credit will be claimed in proportion to ownership in
residence
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IRS Guidelines - Qualifying for the Tax Credit
You Cannot Claim Tax Credit if any of these apply
• Your modified adjusted gross income (MAGI) exceeds phase out income maximum limits
• You are a nonresident alien• Your home is located outside the United States• You sell the home, or it ceases to be your main
home before the end of 2009– Recapture applicable if you sell within 3 years of purchase
• You acquired your home through gift or inheritance • You acquired your home from a related person:
– Spouse, ancestors (parents, grandparents,etc.)– Lineal descendants (children, grandchildren, etc.)– A corporation in which you directly or indirectly own more than 50% in
value of the outstanding stock of the corporation.– A partnership in which you directly or indirectly own more than 50% of the
capital interest or profits interest
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IRS Guidelines - Qualifying for the Tax Credit
Claiming the First Time Homebuyer Credit
• IRS Form 5405 – Attached to 1040
• A main home purchased in 2008 is only eligible for $7,500 tax credit and may be claimed on 2008 return
• A main home purchased in 2009 is eligible for $8,000 tax credit and may be claimed on 2008 (or amended 2008) or 2009 tax return
• CANNOT claim the credit prior to purchase of home– 5404 required address of home qualifying for the credit– 5404 requires date home acquired– Lying on tax return is a federal offense – not worth it
• You may adjust your W4 withholdings in anticipation of claiming credit on 2009 tax return