Federal Homebuyers Tax Cedit

Hi all,

Many folks are asking about the Federal Tax credit – here is an overview of the qualifications as well as a link to the IRS for the appropriate form.

The form can be found at:
http://www.irs.gov/pub/irs-pdf/f5405.pdf

General Rules:

* A “first time home buyer” is defined as someone who has not owned a primary home in the last three years. If you are a “first-time home buyer”, your tax credit will amount to 10% of the purchase price of your new home not to exceed $8,000.

* A “long-time resident” is defined as someone who has lived in the same primary home for 5 out of the past 8 years. If you are a “long-time resident”, your tax credit will amount to 10% of the purchase price of your new home not to exceed $6,500.

* The tax credit does not need to be paid back if you continue living in the home as your primary residence for three years without selling it.

* The home must be purchased for less than $800,000 before May 1, 2010. If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010.

* Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

* You cannot purchase the home from a related party like a spouse, direct ancestor, or direct lineal descendent (child or grandchild); however, you can still qualify for the credit if you purchase a property from siblings, nephews, nieces, and others.

* If you are married, both spouses must qualify for the credit.

* If more than one unmarried individual is buying the property, the credit can be split up among all the individuals who qualify. However, the total credit taken cannot exceed $8,000 (or $6,500 for “long-time residents”). Alternatively, if only one of the unmarried buyers qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit.

* The credit applies even if you have co-signers on your mortgage loan.

* The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others.

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