As I’ve mentioned before, my husband and I are looking at homes to buy. We’ve weighed the pros and cons of renting and owning. We’ve been looking at how big a down payment we can make for the house.

What is the $8,000 Tax Credit for First-Time Homebuyers?

It’s a tax credit of up to $8,000 (no more than 10% of the home’s purchase price) is available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

Buying a home this year?

Eligibility for the First-Time Homebuyer Credit

There are some requirements you have to meet before you can get the First-Time Homebuyers credit.

• You must be a first-time home buyer.
• The house must be bought between Jan. 1, 2009 and Dec. 1, 2009.
• Your modified adjusted gross income (MAGI) is less than $95,000 for an individual or $170,000 for a married couple filing a joint return.
• The house you purchase must be your primary residence.
• The buyer must live in the home for at least three years after the purchase date. You will have t repay the credit on a home only if the home ceases to be your primary residence within 3 years from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.

Tax Information on the First-Time Homebuyers Credit

IRS has information the tax credit for purchases made in 2009. Here are some answers from the IRS on common questions:

Q. I am in the process of buying a home. I expect to close the deal before December 1, 2009. Can I claim the first-time homebuyer credit now? That would allow me to use the refund for a down payment.

A. No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchasers occurs at the time of the closing, you do not qualify for the credit.  IRS news release 2009-27, First-Time Homebuyers Have Several Options to Maximize New Tax Credit, contains details for filing options if the home is purchased after April 15, 2009.

Q: When must I pay back the credit for the home I purchased in 2009?

A:  Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009.

Q. If I claim the first-time homebuyer credit for a purchase in 2009 and stop using the property as my principal residence before the 36 month period expires after I purchase, how is the credit repaid and how long would I have to repay it?

A. If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at that time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year’s tax return. Form 5405 and its instructions will be revised for tax year 2009 to include information about repayment of the credit.

Your Thoughts

Will you buy a house this year? How much did the tax credit factor into your plans?

Photo Credit: roarofthefour

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