APRIL 16, 2009 ISSUE
Now Is The Time To Buy Your First Home
IRS Introduces New Tax Credit for First-Time Homebuyers
Home sellers may be having a difficult time in the current housing market, but first-time homebuyers are finding themselves in a unique position to make a savvy purchase.
So why is now the time to buy when doom and gloom financial news is the standard? For three reasons: interest rates are at an all-time low, more homes are on the market than ever before and the Internal Revenue Service (IRS) is offering a new tax credit to first-time homebuyers that, unlike the credit in 2008, does not have to be repaid.
A tax credit of up to $8,000 is now available for qualified first-time homebuyers purchasing a principal residence on or after January 1 and before December 1. Unlike the tax credit enacted in 2008, the new credit does not have to be repaid, according to an IRS new release.
Qualifying taxpayers who buy a home this year before December 1 can get up to $8,000, or $4,000 for married filing separately, and can claim the credit on either their 2008 or 2009 tax returns.
For purposes of the credit, people are considered to be first-time homebuyers if they—and their spouse if they are married—did not own any other main home during the three-year period ending on the date of purchase.
“This important change gives qualifying homebuyers cash they do not have to pay back,” said IRS Commissioner Doug Shulman.
The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.
Citizens do not have to repay the credit provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.
The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.
The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.
For more information on the tax credits, click to www.irs.gov.
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