With the recent passing of
the American Recovery and Reinvestment Act first time home buyers have
even more incentive to buy a home. You can read about how the tax credit
works below.
How the tax credit works
The bill provides up to an $8,000 refundable
tax credit (or up to 10% of the purchase price). If the property is $75,000,
the credit is only $7,500.
The credit is available to first-time
buyers of a principal residence on or after January 1, 2009 and before
December 1, 2009. This is someone who did not own another main home at any
time during the three years prior to the date of purchase.
The credit does not require repayment. The
credit will be claimed on a tax return to reduce the purchasers
income tax liability.
If the buyers tax liability in the given
year is less than $8,000, the IRS will send a refund for the balance.
According to the 2008 IRS Tax Tables: A
single filer would need $46,600 in taxable income to have $8,000 in tax
liability. A couple would need $58,600 in taxable income to have $8,000 in
tax liability.
Taxpayers whose income is more than
$75,000, or $150,000 for joint filers can claim 10 percent of the
purchase price up to $8,000, or $4,000 for married individuals filing
separately
Exceptions
If any of these conditions exists, the
credit will not be available.
Income exceeds the phase-out range. $95,000
for individuals, $170,000 for couples
The home is purchased from a close relative.
This includes spouse, parent, grandparent, child or grandchild.
You stop using your home as your main home.
If the home is sold prior to three years of
ownership, the tax credit must be repaid.
