7Published in The Houston Chronicle, Sunday, November 22, 2009
It’s official, President Obama has signed a bill that extends the tax credit for first-time home buyers (FTHBs) into the first half of 2010. In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure opens up opportunities for others who are not buying a home for the first time.
The program gives those who own a residence some additional reasons to move to a new home. This incentive is a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a Primary Residence for 5 consecutive years during the last 8 years.
Deadlines for all contracts need to be in effect no later than April 30, 2010 and close no later than June 20, 2010.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn up to $145,000 can receive a partial credit. Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn up to $245,000 can receive a partial credit. Maximum purchase price: $800,000.
What is a tax credit? A tax credit is a direct reduction in tax liability owed to the IRS.
What is the tax credit for first-time home buyers? An eligible buyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500.
Who is eligible for the tax credit? Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. If either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible. As mentioned, the tax credit has been expanded so existing homeowners who have owned and occupied a primary residence for a period of 5 consecutive years during the last 8 years are eligible for a tax credit of up to $6,500.
How do I claim the credit? For those taking advantages of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405.
If any of these apply, a credit would not be due.
- You buy your home from a spouse, parent, grandparent, child, or grandchild.
- You do not use the home as your principal residence.
- You sell your home before the end of the year.
- You area nonresident alien.
- Your home financing comes from tax-exempt mortgage revenue bonds.
- You owned a principal residence at any time during the 3 years prior to the date of purchase of your new home.