Will a Tax Credit Help You?March 11, 2009
Tax season is in full swing, which put me in mind of the Tax Credit being offered to first-time home buyers as part of the Economic Stimulus Plan. This tax credit should not be confused with the Tax Credit of 2008. The tax credit in the 2008 stimulus plan was for $7,500 and had to be repaid. The new tax credit (American Recovery and Reinvestment Act of 2009) was increased to $8,000 with no repayment requirement. However, if you sell the home within three years or if the home is no longer your principal residence within the same three years, the tax credit must be repaid.
The time frame to take advantage of the tax credit by first-time home buyers is limited. The escrow must close between January 1, 2009 and November 30 2009. The tax credit does have income restrictions. There is a maximum income limit of $75,000 for single households and a $150,000 income limit for married couples. However, if your income is higher than the limit, you may still qualify for a tax credit. For those with an adjusted income over the limit, there is a phase out plan. For example, if your adjusted income is $160,000, you could still qualify for an approximate tax credit of $4,000 (maximum). The tax credit is not a full $8,000 but is based on the purchase price of the home. First-time buyers can claim 10% of the home’s purchase price as their tax credit.
The tax credit may also be applied to your 2008 tax year. First-time home buyers have the opportunity to determine which year’s tax filing (2008 or 2009) would be more advantageous to apply the tax credit. An amended 2008 tax return can be filed when filing your 2009 taxes. Please consult with a professional tax advisor to determine which year the tax credit will work for you.
The tax credit applies to any type of property, including multi-family dwellings which are owner occupied. Remember, a first-time home buyer does not necessarily mean that you have never owned a home. A first-time home buyer is defined as anyone who has not owned a home in the last three years. If you are considering a home purchase this year, the tax credit being offered may help your 2009 (or 2008) tax filing.