The program today is called the American Recovery and Reinvestment Act of 2009 and authorizes up to $8,000 tax credit for first-time home buyers purchasing a principal residence. Many people have questions about the homebuyer tax credit and below are some of the answers for our buyers. Remember you should consult a qualified tax advisor or legal professional about your unique situation.
As the program now stands, which is scheduled to end on December 1, 2009, first time homebuyers purchasing any kind of home – new or resale – are eligible for the homebuyer tax credit. The definition of a first time home or condo buyer is as follows; a buyer who has not owned a principal residence during the three year period prior to the purchase. For married buyers the test is of both home buyer and his/her spouse. This year’s tax credit is different from last year’s because it does not have to be paid back. This year’s tax credit is a true credit, not an interest free loan. However, the home buyer must use the residence as their principal residence for at least three years or possibly face a recapture of the tax credit amount. Claiming the tax credit has also been made easier. All you have to do is complete the tax credit on IRS form 5405 to determine the amount and then claim the amount on line 69 of your 1040 income tax return. No other applications and forms are needed. This is what is now available but Congress is on the verge of modifying and extending the program to include more potential homeowners who can take advantage of the credit. The latest idea under consideration is a credit of $6,500 for homeowners looking to trade up to a bigger primary residence and who have already lived in their current home for five years. To qualify for the full credit homebuyers must have adjusted gross income of less than $125,000 or $225,000 for married couples filing jointly. The homebuyer tax credit will only apply to homes sold for $800,000 or less and contracts to buy a home must be signed by April 30, 2010 and must close by June 30, 2010.
Support of the changes is bipartisan which gives an extension a much better chance than ever before. Supporters maintain the current credit has helped boost existing home sales and more is needed going into 2010 to stabilize prices and generate jobs in a year when a rise in foreclosures is expected.
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