Monday, March 9, 2009

$8000 Federal Income Tax Credit: First Time Home Buyers can get an $8000 tax credit for buying a house this year.

$8000 Federal Income Tax Credit: First Time Home Buyers can get an $8000 tax credit for buying a house this year. Congress has recently enacted legislation that allows first time home buyers to receive a credit of up to $8000 on their income taxes. Unlike "credits" of the past, this will not need to be repaid. It is a dollar for dollar credit. This means that if you buy a home in 2009 and at the end of the year you owe $1000 in taxes, you will actually receive $7000 after filing for the $8000 tax credit. This new legislation definitely provides a fair deal of opportunity for prospective buyers. It also raises a lot of questions which I will address here. Who can get the $8000 tax credit? How is the amount of the credit determined? How do I file for the $8000 tax credit? Do I need to apply? What types of homes qualify for the $8000 tax credit? Can I claim the tax credit on my 2008 Federal Income Taxes or just 2009? Can the tax credit be used as a down payment? I don't have enough of a tax burden to have $8000 of tax burden credited. Can I still get the refund?

Who can get the $8000 tax credit?
The first qualification is that you are a first time home buyer. First time home buyer is a term that is defined by anyone who has not owned their primary residence for at least three years prior to the purchase. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. Taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) are not eligible for this credit.

How is the amount of the credit determined?
The tax credit is an amount equal to 10% of the purchase price up to $8,000. Basically this means that properties purchased by eligible buyers for more than $80,000 receive the $8000 credit. Properties bought for less than $80,000 would receive 10% of the purchase price as a tax credit.

How do I file for the $8000 tax credit? Do I need to apply?
Filing for the $8000 tax credit is easy. The paperwork is done simply while filing your Federal income taxes. Home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim that amount on Line 69 of their 1040 income tax return.

What types of homes qualify for the $8000 tax credit?
Any home that will be used as a primary residence. This can include single family residences, condominiums, town homes, manufactured (mobile) homes and even a houseboat.

Can I claim the tax credit on my 2008 Federal Income Taxes?
Yes. The legislation allows the credit to be claimed on 2008 taxes that have not been filed even if the purchase is made in 2009. This means that you can choose which year it would be best to offset your income if the purchase is made in time for 2008 tax filing.

Can the tax credit be used as a down payment?
No...Yes...well, kinda. Home buyers will receive the credit after the home is purchased so it can not be used for the down payment. However, qualified buyers could purchase a home in 2009 and have someone gift the down payment to them, which is as low as 3% with FHA financing, file their taxes for 2008 with the credit included and return the money to the family member/friend when they receive their tax refund.

I don't have enough of a tax burden to have $8000 of tax burden credited. Can I still get the refund?
Yes. Even if you have a refund, the credit will be added to it. For example, if you were to receive $1500 refund on your 2009 Federal Income Taxes, you could receive $9500 with the $8000 First Time Home Buyer tax credit included.

If this applies to you, this is the perfect time for you to buy a home. There are great deals available and with an incentive like this, it should make the decision to buy a bit easier.

There is a follow up to this article: NORTHWEST AUSTIN HOMES: $8000 Tax Credit- How to get a 10% rebate of your homes value.

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Posted by Brian W Martin REALTOR for The Pinnacle Group of Keller Williams specializing in helping First Time Home Buyers make great decisions to purchase Real Estate in Austin, TX

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