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$7500 First-Time Homebuyer Income Tax Credit

January 9th, 2009 10:16 AM by Lehel Szucs

$7500 First-Time Homebuyer Income Tax Credit


Highlights
First time homebuyers who purchased a principal residence between 4/9/08 and 7/1/09 qualify for the tax credit.
The maximum credit is $7500 OR 10% of the purchase price if lower than a $75,000 sales price.
If home is purchased in 2009, homebuyer can elect to amend 2008 tax returns and claim a tax credit.
Tax credit is recaptured by the IRS.  It's really an interest-free loan paid back over a 15-year time period.
 
The following are not eligible for the tax credit:
Non-resident aliens
Buyers who finance home with tax-exempt mortgage bond programs
If property is disposed of before end of tax year
If property ceases to be principal residence before end of tax year
If property is acquired from a person who is related* to the homebuyer
*If modified Adjusted Gross income exceeds 95,000 (individual) or $170,000 (joint)
Credit phases out for individual Adjusted Gross Income between $75,000- $95,000, and between $150,000- $170,000 for joint filers
(Special rules apply for Washington D.C.)

Further Definitions
First Time Homebuyer - Not having ownership interest in a primary residence within the last 3 years.  It's from settlement date to settlement date; the date of the sales contract is irrelevant.
Loan Types - Not loan specific.  It applies to FHA, VA, Fannie, Freddie, and Non-Conforming.
Income Tax Credit - This is a tax CREDIT, not a tax deduction. It doesn't matter if the qualified homebuyer's entire tax burden is less than $7,500 or even $0.00.  However, tax returns must be filed to claim a refund.
House becomes Non-Owner Occupied - Once the home becomes non owner-occupied or sold, the remainder of the credit is called due.  If the borrower buys another primary residence within two years, they go back to the 15 year payback schedule.
Recapture sell home - The borrower doesn't have a pay back if they lose money on the home or the maximum total recapture, including what they've already paid, is limited to the actual gain when/if they sell the home.
Municipal Bond Loans - Not eligible.  If the borrower financed using a bond program such as the State Housing Program, etc., they do not qualify for this credit.


**Please discuss your specific tax situation with your accountant.  We do not offer tax advice, we simply provide you information to discuss with your tax advisor.

This is written and condensed from HR 3221, the ?Housing and Economic Recovery Act of 2008, which was signed into law by President Bush 7-30-08. This particular section is relative to IRS tax code. We have worked diligently to accurately analyze and make sense of the legislation to provide information that is trustworthy and of benefit to you, but none of the parties presenting this information is an attorney or an accountant and do not guarantee the interpretations. Any actions you choose to take on the information provided should first be approved by legal or financial counsel.

Posted in:General
Posted by Lehel Szucs on January 9th, 2009 10:16 AM

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