Wednesday, April 29, 2009, PM | Leave Comment
There is a nice windfall for some home buyers in the economic stimulus bill signed into law first week of April by President Obama. First-time buyers can claim a credit worth $8,000 – or 10% of the home’s value, whichever is less – on their 2008 or 2009 taxes. This is refundable tax credit, not a deduction.
- If you owe IRS less than $8,000, you get the difference.
- If you owe IRS more than $8,000, you pay the difference.
- If IRS owes you, you get $8,000 plus what IRS owes you.
Who is eligible to claim the tax credit?
- The home purchase must occur between January 1, 2009 and November 30, 2009 – both dates inclusive. For the purposes of the tax credit, closing and the title to the property transfers to the home owner must occur between these dates.
- The very first-time ever buyer. No recorded history of ever buying a home before – brand new or older home.
- Also, the law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the home ownership history of both the home buyer and the spouse.
- For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.
- However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.
- Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
There is always an income limit – what is it?
- The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return.
- The tax credit amount is progressively reduced for buyers with a modified Adjusted Gross Income (AGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return.
- The phaseout range for the tax credit program is equal to $20,000.
- This simply means that the tax credit amount becomes $0 with Adjusted Gross Income (AGI) of more than $95,000 for single taxpayers and $170,000 for married taxpayers filing a joint return.
In a Nutshell
It is not a tax-deduction. It is a tax credit.