$8,000 Tax Credit For First Time Home Buyers

Have you taken advantage of the up to $8,000 tax credit for first time home buyers yet? If not, you'll need to do so pretty quickly since it will be expiring April 30, 2010. Here's a look at some of the most commonly asked questions about this Worker, Homeownership and Business Assistance Act of 2009.

What are the basic eligibility requirements?

You need to be a first time home buyer to be eligible for the full tax credit. The home can be a new construction or a resale, and you must have a sales contract in place by April 30. Any type of new home is eligible; it can be a single family unit, condominium, townhouse, duplex, etc.

What about income limits?

The act has set up an income limitation for eligibility at $75,000 for single taxpayers and $150,000 for those who are married and file a joint return, but there are several other provisions in the act that may make these amounts higher. You will need to talk to a professional in your specific situation.

How do I know if I'm a first time home buyer?

Under this particular housing act, a first time home buyer is someone who hasn't owned their own principal residence within the last 3 years. This would also apply to both a husband and wife if you file jointly. Neither may have owned a home in the last 3 years to qualify. 

Does it matter how much the house cost to get the full $8,000 tax credit?

Yes, the way the law reads the credit is basically 10% of the purchase price of the home…up to a maximum of $8,000. So, if you paid $50,000 for the home, your credit would be 10% of that, or $5,000.

What forms are required to claim the credit?

You will claim the tax credit on your federal income tax forms. IRS Form 5405 is the exact form you'll need to fill out for the credit itself. Just be sure that your purchase is eligible prior to filling out the form and taking the deduction.

What happens if my taxes due are less than the credit? Can I get a refund check as well?

Yes, this is a refundable tax credit. For example, if you have a total federal tax liability of $3,000 and you had a tax withholding of $2,500 for the year, then you would generally owe the IRS $500. But…since you qualified for the tax credit, the IRS would send you a refund check in the amount of $7,500. ($8,000 – the $500 owed)

These are only some of the most commonly asked questions in regards to the 8,000 tax credit for first time home buyers. You can do a search online to find out much more on this program and how it can help your particular situation.