As part of the American Recovery and Reinvestment Act of 2009 first time home buyers are now eligible for a tax credit of $8,000. Home owners who purchase their house between January 1, 2009 and December 1, 2009 will be eligible for the credit.
The law states that the credit is available to first time home buyers, however the law also allows anyone who has not owned a home for three years to qualify. For example, if you sold your home on June 1, 2006, you will have to close on your new home subsequent to June 1, 2009 to qualify.
You will receive the tax credit when you file your individual tax return. As part of this filing, you will need to complete Form 5405 which determines the amount of credit you will receive. The credit can be claimed on either your 2008 or 2009 tax return. If you already filed your 2008 tax return, you can amend the return to obtain the credit.
The good part. Everyone should understand that this is a credit to the tax payer, not a deduction. A tax credit is a dollar for dollar benefit to the tax payer. Unlike a tax deduction which merely decreases your taxable income a tax credit comes off the top of the taxes you pay. Additionally this tax credit does not have to be repaid to the government like the “credit” available to first time home buyers in 2008.
The credit shall be equal to 10% of the purchase price of the home, not to exceed $8,000. There are restrictions on who is eligible for the tax credit. A single taxpayer with a income up to $75,000 and couples with income of up to $150,000 qualify for the full credit.
For first time homebuyers or folks that have not owned a house in the last 3 years this is a great opprunity to get a home and let Uncle Sam foot some of the bill. Don't let this once in a lifetime pass you buy.