Tax Credit for First Time Home Buyers 2010

Nearly 1.5 Million people have taken advantage of the $8,000 tax rebate since it’s conception in January 2009. The tax credit has been available to all first time home buyers. The first time home buyer is defined as anyone who has now owned their own home for three consecutive years. Oh, one more criteria for eligibility… It must be for your primary residence which is unfortunate for investors. The credit is in the form of a tax rebate for 10% of the purchase price of the home, up to a total of $8,000. One of the great benefits of the tax rebate is that is FULLY refundable to the buyer. For instance if the first time home buyer owed no taxes on their taxes, then the first time home buyer can amend their tax return and capture the full $8,000.

Following Congress approval, President Obama has signed off on the bill approving an extension of the $8,000 new home buyer tax credit until April 30th 2010. It is available till the end of 2010, but in a phased out fashion. Also, the new provisions in the extension are NOT retroactive.

How to Qualify for the $8,000 First-Time Homebuyer Credit Extended into 2010

The popular homebuyer credit got a big boost thanks to the Worker, Homeownership, and Business Assistance Act of 2009, signed into law on November 6, 2009. The new law extends and expands earlier laws: 

* First-time homebuyers get more time to qualify for a federal tax credit of up to $8,000. The deadline for buying a home has been extended from November 30, 2009.  Buyers must purchase or enter into a binding contract to buy a home on or before April 30 and close on the home by June 30, 2010.
* Starting on November 7, 2009, the law includes a new credit of up to $6,500 for homebuyers who have owned a home for a period of five consecutive years in the past eight years.
* Also beginning on November 7, 2009, the income requirement ceiling is lifted allowing more middle and upper middle-class buyers to qualify for a either kind of credit.

While many of the rules are the same for the $8,000 first-time homebuyer credit and the $6,500 homebuyer credit, there are important differences.

Who Cannot Claim the Credit

You cannot claim the credit if your modified adjusted gross income (MAGI) is $95k or more ($170k or more for married filing jointly). You are also excluded if you are a non-resident alien, your home is located outside the United States, you acquired the home gift or inheritance, or you purchased it from a related person. There are also a few other somewhat esoteric exclusion, so be sure to read the form carefully.

How long does it take to receive a check?

First, the home has to close escrow.  The only way to get the first time home buyer rebate check is to have bought a house, and close on it before November 31, 2009.  A person cannot receive the tax rebate check, or request for a check without first closing on the house.  This means that even if the house is in escrow, the money cannot be processed until the house has actually turned hands and the person who is going to request for the funds is the primary owner of the house and the house is the primary residence for the individual.

Economic Stimulus Plan Negotiations: First $7,500, Then $15,000, Now $8,000

The original first-time homebuyer tax credit rules only allowed for a $7,500 interest-free loan from the government, repayable over a period of 15 years. During 2009 economic stimulus package negotiations, Senator Johhny Isakson proposed and temporarily got a $15,000 housing provision placed in the stimulus package terms. Upon final House and Senate approval, however, the original $7,500 home purchase credit remained with minor changes and a slight enhancement in which certain home purchases made in 2009 would be eligible for an up to $8,000 non-repayable tax credit.

How much is the credit?

The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 ($8,000 if you purchased your home in 2009 or early 2010) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more ($80,000 in 2009 or early 2010). Long-time homeowners who buy a replacement home after Nov. 6, 2009, or in early 2010 may qualify for a credit of up to $6,500, or $3,250 for a married person filing a separate return.

Who is considered to be a first-time homebuyer?

Taxpayers who have not owned another principal residence at any time during the three years prior to the date of purchase are considered first-time homebuyers. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008. In addition, Long-time homeowners who buy a replacement home after Nov. 6, 2009 or in early 2010 can also qualify. Under this rule, you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you by your new principal residence. For an eligible taxpayer who, for example, bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009.

Which home purchases qualify for the first-time homebuyer credit?

Any home purchased as your principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before May. 1, 2010 (with closing to take place before July 1), to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home.

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