There never has been a better time to buy a home, especially, if you are a first-time buyer. In addition to great values and affordable pricing, many first-time buyers now qualify for a tax credit of up to $8,000.
While it may sound too good to be true, many future homebuyers who purchase a primary residence by Dec. 1 may qualify for a tax credit that does not need to be repaid. Here are 10 common questions and answers regarding this program:
1. Who is eligible?
First-time buyers who are purchasing any type of home before Dec. 1. The purchase date is the actual date when closing occurs and title transfers ownership.
2. Who is considered a "first-time" buyer?
A "first-time" buyer is someone who has not owned a principal residence during the three-year period prior to the purchase. It is important to note that for married taxpayers, the law tests the homeownership of both the buyer and the spouse.
3. How is the tax credit amount determined?
The tax credit awarded is equal to 10 percent of the home's purchase price, up to a maximum of $8,000.
4. What are the income limits for this program?
The income limit for single taxpayers is $75,000; and $150,000 for married taxpayers filing jointly. However, there may be tax credit opportunities for homebuyers whose modified adjusted gross income (MAGI) exceeds these income limits, so consult your tax or mortgage professional.
5. What types of homes qualify for the tax credit?
Any home that will be used as a principal residence, including single-family detached homes, attached townhomes and condominiums, and manufactured homes. However, rules apply regarding the purchase of a home from a family member.
6. Are tax credits refundable?
Yes, which means the homebuyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. This often involves the government sending a taxpayer a check for a portion or even the entire amount of the refundable tax credit.
7. How does the tax credit differ from a tax deduction?
Tax credit is a dollar-for-dollar reduction in what the taxpayer owes. For example, if a taxpayer owes $8,000 in income taxes, and receives an $8,000 tax credit, then he or she would not owe anything to the IRS. A tax deduction is subtracted from the amount of income taxed, and only would result in a $1,200 reduction.
8. How does this program differ from the tax credit Congress enacted in 2008?
Most significantly, this tax credit does not have to be repaid, as long as the buyer uses the residence as his or her principal home for at least three years. This tax incentive is a true tax credit.
9. Do I need a special form or application to claim the tax credit?
Participation in the program is easy. You claim the tax credit on your federal income tax return using IRS Form 5405, and also claim the amount on line 67 of the 1040 income tax form for 2009.
10. How can I find out more about this program?
You can visit federalhousingtaxcredit.com, realtor.org or irs.gov/newsroom/arti
cle/0,,id=206293,00.html
For additional information regarding homeownership, visit the U.S. Department of Housing and Urban Development Web site at: hud.gov/buying
/index.cfm.
For details regarding local Realtors and real estate professionals in your area, contact the Sierra Nevada Association of Realtors at 775-885-7200 or sierranvar
.com.
• Joan Zadny, president of the Sierra Nevada Association of Realtors, is a full-time Realtor at Charles Kitchen Realty in Carson City. She can be reached at 775-843-4903 or jzadny@charles
kitchen.com.