Homebuyers Tax Credit -- The Basics
1. What´s the Homebuyer Federal Tax Credit ?
On November 6th, 2009 The US Federal Government has extended the The Worker, Homeownership, and Business Assistance Act of 2009 to April 30, 2010 and April 30,2011 for Military personnel.
It is available for the purchase of a principal residence only.
2. What makes me eligible?
To be eligible you may not have purchased a primary residence in the past three years to be considered as a First Time Homebuyer. And new to the credit are current homeowners that have been in their primary residence for 5 of the last 8 years.
3. What about an income restriction?
Indeed there are income restriction. As of November 6, 2009, Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $125,000. Married couples who file a Joint return may have income of no more than $225,000. The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns. These amounts are determined by the Adjusted Gross Income amount.
4. How is 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. The home purchase price may not exceed $800,000.
5. What defines a "principal residence?"
Principal residence is defined by the IRS as a townhome, condo, single family dwelling or mobile home, houseboat or manufactured home where the owners spend more then 50% of there time or the term owner occupied. You may NOT be eligible if you purchase a home from ANY family relative. (consult a tax advisor for further explanation.)
6. Can the property be outside the United States?
No, The property in question must be located in the United States and surrounding territories with US status such as the US Virgin Islands.
7. What if you sell the home a year after you received the credit?
You must live in the home for 3 years. Otherwise you will have to re-pay the credit through the sale of the home.
8. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?
The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.
9. How do I apply for the credit?
All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new IRS Tax Form 5405 worksheet that you will attach to the 1040.
10. Is there anyway to receive the cash flow benefits before I file my tax return?
You may adjust your withholding with your W-4. But be sure to speak to a qualified CPA before you consider this.
11. I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
12. I have a home under construction. Am I eligible for the credit?
Yes, so long as you actually occupy the home before the April 30, 2010 deadline.
13. For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.
For detailed information direct from the source contact : National Association of Home Builders