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First Time Buyer Tax Credit is About to Expire.The First Time Buyer Tax Credit is About to Expire

Those who have been “fence sitting,” contemplating the purchase of a new home, are about to lose a gift from the federal government. The First Time Buyer Tax Credit of up to $8,000 will expire on November 30, 2009.

The tax credit, a part of the American Recovery and Reinvestment Act of 2009, equals 10% of the purchase price of a home, with a maximum credit of $8,000 for those homes purchased in 2009 and prior to the program’s expiration. The credit is available to single taxpayers or married couples filing joint returns, but only half the amount for married persons filing separate returns.

And the great news is: This money is not limited to “first time buyers,” but to anyone who hasn’t owned a home within the past three years. According to the IRS: Taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. This means that you can qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to a purchase. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return. Any home purchased as the taxpayer’s principal residence and located in the United States qualifies.

The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.

Anyone contemplating a home purchase and who qualifies for the First Time Buyer Tax Credit must act quickly in order to be able to complete their purchase prior to the expiration of this program. While most of us regularly complain about the taxes we pay, in this program the government pays us back; and it is a great way to accumulate some instant equity in a home.

Click HERE for a list of FAQs about the First Time Buyer Tax Credit that was prepared by the National Association of Homebuilders.

For the tax implications of the tax credit, click HERE for more information from the Internal Revenue Service.


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