The first-time homebuyer program can be a boon to people who want to
buy their first home, since it can save significant money through the
up to $8,000 tax credit you can get when you participate. However, this
can also be confusing, because you may not quite know just what the
qualifications are to participate. Let's take a look at them.
Specific homebuyer tax credit qualifications can vary, depending on
when you participated (the tax credit itself has gone through several
changes since its inception), but for most people, if you purchased
your home in 2009, or going into 2010, you are considered a "first-time
homebuyer" if you haven't owned a home in the previous three years.
The credit itself can amount to 10% of the purchase price of the home,
up to $8,000 at the maximum. This is available to single taxpayers or
married couples filing jointly, but if you're married and you file
separate returns, half of that amount is available to those couples.
You can get the full credit if the home costs more than $80,000 as of
2009.
As long as the home you purchase is your principal residence and it's
located in the US, it qualifies; you must buy the house before May 1,
2010, and you must close on the house before July 1 if you want to
qualify. If you are newly constructing a home, your purchase date is
considered the date you occupy the home.
You are not eligible for the credit if you have owned a principal
residence in any time during the three years prior to the date of
purchase.
By the way, "principal residence" can mean mobile homes as well, in
that you can lease the land the mobile home is on but own the mobile
home itself and still qualify for the credit.
The credit is applicable on homes purchased after April 8, 2008, and
you have to complete a purchase in that you enter into a binding
contract to buy the home you want before May 1, 2010; you have to close
before July 1, 2010, if you want to qualify for the credit.
You claim the credit on IRS form 5405, the First-Time Home Buyer
Credit; you then file it with the income tax return from the year you
bought a home in, in this case, 2009. If you already filed a 2008 or
2009 tax return and didn't claim the credit, you can amend your tax
return and claim the credit by using Form 1040X and then attaching Form
5405. You'll also need supporting documentation when you file the claim.
One final note: the credit is meant to be for low or modest income
homebuyers. The credit is reduced or eliminated if you are a taxpayer
with higher income. It's gradually based upon your modified adjusted
gross income.
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