First Time Homebuyer Credit

I’m sure most everyone has heard about the First Time Homebuyer Credit by now. The Federal Government is giving an $8,000 tax credit, which is refundable (after any taxes owed, you will receive check for the balance) to first time buyers. This was set to expire on December 1, 2009 but now has been extended. Buyers must enter into a binding contract by April 30, 2010 and close on the property by June 30, 2010.

There are very specific rules and it is important that you understand all of them before assuming that you are eligible. A couple of the highlights are: In order to qualify you cannot have owned a home within the last 3 years prior to the date of your new purchase. If you are married, even if only one of you had owned prior property, neither one of you qualify for this credit. There are cases that you will have to pay back the money (if you sell your property within 36 months of purchase).

Also under the new legislation passed on November 6, 2009, there is a new credit available to first time, long-time homeowners who buy a replacement principal residence. They may claim a credit of up to $6,500. They must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

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 taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.

This article is not intended to cover all the rules, but give you a few of the highlights. It is very important to fully research this credit before making the assumption you are eligible.
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