Recently, in an effort to jump-start the housing market in North America, an $8,000 tax credit incentive was offered to new (first-time) homebuyers. There are several restrictions on this tax credit incentive that can go a long way in encouraging renters to take that first step towards first time homeownership. To qualify as a first-time homebuyer, the taxpayer cannot have owned a home within the three years prior to purchasing the new property.
The tax credit is not a standard $8,000 across the board for all qualified homebuyers. It is calculated at being the sum of 10% of the sell price of the home; up to a maximum of $8,000.
– The first qualification requirement is, aside from the obvious requirement of needing to be a first-time homebuyer, is that the home must be purchased after the 1st of January, 2009 and before the 1st of December, 2009. The home can be a new build or an existing build; that is not an issue to be taken into consideration.
– There is an income limitation on the tax credit; the household income is limited to single first-time homebuyers who make $75,000 or less, and $150,000 or less limit for married homebuyers.
– The home must be the primary residence of the person(s) making the purchase; it cannot be a rental property or a second home such as a vacation property. The home can be a single-family home, an apartment, or even a mobile home; the type of structure is not really relevant as is related to this tax credit.
The first-time homebuyer tax credit is a true credit and not a tax deduction; this means that the $8,000 will not need to be repaid to the government at a future date, with one exception. This exception is if you sell the home within three years of making the initial purchase. The tax credit will go towards any federal taxes that you owe at the end of the year. Should you not have any owed federal income taxes to offset then the credit will be issued to you in the form of a check with the rest of your tax refund.
Claiming the first time homebuyer tax credit is a very simple process; it can be claimed on your federal income tax return. Your tax preparer will be able to assist you in ensuring that you meet all of the qualifications.
You can claim the tax credit on either your 2008 or your 2009 tax return; just so long as your home was purchased between January 1st, 2009 and December 1st, 2009. If you have already submitted your tax return statement for 2008 and wish to now claim the credit for 2008, you can file an amended tax return to ensure that the credit applies to 2008.
If you have been sitting on the fence with making the final decision to purchase your first home, take the $8000 tax credit into consideration. It just might make great financial sense for you to take advantage of the credit while it is available to you.
Ryan F – Real Estate and Mortgage professional.