What is the First Time Home Buyers Credit?

Answer:

Update: First Time Home Buyer Credit is No Longer Available

10-23-09 Update for those interested in buying homes or condos in Naples:

The $8,000 tax credit (First Time Home Buyer) has been extended and approved for military personnel until November 30 2010 (1-year extension). Active military personnel (served on active duty for at least 90 days) qualifies for this Service Members Home Ownership Act of 2009.

Congress has submitted several proposals for extension as the deadline is rapidly approaching:

Ben Cardin, D-MD Senator - He presented S.1678 to extend the $8k first time home buyer tax credit to June 1, 2010.

Johnny Isakson, R-GA Senator presents S.1230 to extend the tax credit until November 30, 2010 and expand the tax credit to $15,000 to include all home buyers.

Original Answer:

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers* who purchase a home after December 31, 2008 and before December 1, 2009. With home prices lower than they have been in a long time, this is a great opportunity to help more prospective buyers to become new homeowners.

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return.

 

The tax credit is a straight dollar-for-dollar reduction of your tax bill.

 

For first-time home buyers* purchasing a home, the tax credit is equal to 10% of the home's purchase price, not to exceed $8,000.

 

The credit begins to phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 in the case of a joint return.

 

Within the first three years of the purchase date, if the you either sell your home or it ceases to be their primary residence, the tax credit must be repaid to the Internal Revenue Service.

First-time home buyer means any individual if such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which the first-time home buyer credit applies. Clients should consult a tax adviser for more information on how the tax credit will impact them. Tax laws are complex, and we want your clients to be well informed before they make decisions to purchase their first home.

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