Under the Worker, Homeownership, and Business Assistance Act of 2009, the first-time home buyer tax credit has been extended to $8,000 for qualified first-time home buyers in the market for a primary residence. The deadline to buy a home mortgage and receive the tax credit expired on April 30, 2010, but a binding sales contract signed by the April 30 deadline will allow sales completed on or before June 30, 2010 to qualify as well.
The Act establishes income limits of $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns for sales that occurred on or after January 1, 2009 and on or before November 6, 2009.The income limits for sales occurring after November 6, 2009 are $125,000 for single taxpayers and $225,000 for married taxpayers filing joint returns.
FAQ about the First-Time Home Buyer Tax Credit
1. Who is eligible to claim the tax credit?
Any first-time home buyer purchasing a primary residence is eligible for the $8,000 tax credit. The purchase must have occurred on or after January 1, 2009, and on or before April 30, 2009 to qualify, although the law also allows sales completed by June 30 to qualify as long as a binding sales contract was signed by April 30. Those claimed to be dependents by another taxpayer or under the age of 18 are not eligible to claim the tax credit.
2. How is a first-time home buyer defined?
The law defines a first-time home buyer as someone who has not owned a primary residence during the three years prior to the purchase. However, for married taxpayers, the law takes into account both the prior homeownership of the buyer and his or her spouses, so if a home buyer has not owned a home during the three-year period before the purchase but his or her spouse has, then neither one of them qualifies for the tax credit.
3. How does the law determine the amount of the tax credit?
The tax credit is equal to ten percent of the property’s purchase value up to the maximum of $8,000.
4. Do I qualify for the tax credit if my modified adjusted gross income (MAGI) is above the phaseout limit?
Depending on your income, it is possible that partial tax credits of less than $8,000 may be available for taxpayers whose MAGIs exceed the limit.
5. How do I claim the tax credit?
The tax credit is claimed on your federal income tax return. IRS Form 5405 should be completed to determine the amount of the tax credit, and then this amount is claimed on line 67 of the 1040 income tax form for 2009 returns and line 69 of the form for 2008 returns. The form is titled “First-Time Homebuyer Credit” and is also the correct form to claim the $6,500 repeat buyer tax credit.