Home Buyer Tax Credit
As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers and $6,500 for existing homeowners who have lived in their home consecutively for 5 of the previous 8 years.
Here is more information about how the Home Buyer Tax Credit can help prospective home buyers become part of the American dream.
Who Qualifies?
Home buyers must sign a purchase agreement between November 30, 2009 and April 30, 2010, and close by July 1, 2010.
To qualify as a "first-time home buyer" the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
Existing homeowners qualify if they have lived in their home consecutively for 5 of the previous 8 years.
The credit is extended for through June 30, 2011 for members of the military serving outside the United States for at least 90 days.
Which Properties Are Eligible?
The Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
The tax credit may not be used to purchase a home for more than $800,000. Vacation or second homes are ineligible.
How Much Will the Credit Be?
The maximum allowable credit for first-time home buyers is $8,000 and $6,500 for existing homeowners. Each home buyer’s tax credit is determined by two factors:
The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000 or $6,500, depending on status.
Single buyers with incomes up to $125,000 and married couples with incomes up to $225,000 may receive the maximum tax credit.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.
How to Get the First-Time Home Buyer Tax Credit
You've decided to purchase a home and take advantage of the Home Buyer Tax Credit. Here's what you have to do to get your benefit:
- Close on your home purchase by July 1, 2010
- Ensure that you are a qualified first-time buyer under IRS guidelines
- To prevent fraud, you are required to provide documentation proving that you purchased a home
- Be at least 18 yeas old to claim the credit
- Fill out Form 5405 to determine the amount of your available credit