New Housing Tax Credit Q & A's

It’s time to let everyone know! There is a new Tax Credit for First Time Homebuyers. I’m sure a lot of you have questions about it. Who does it benefit? What does the fine print say? How long will this last? Have no fear… I have the simple answers! Know that this is a phenomenal deal for those who qualify.

Here are some popular Q & A’s:

1)Who is eligible?
A: First time homebuyers are eligible. To qualify, the purchase must be made between January 1, 2009 and before December 1, 2009. In this case, the purchase date means the date of closing.

2)Who is a first time buyer?
A: To qualify, the purchaser must not have owned a principal residence during the 3 year period prior to the purchase. For married persons, the law tests the homeownership history of both people, however unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first time buyer.

3)How is the tax credit amount determined?
A: The amount is equal to 10% of the purchase price, up to a maximum of $8,000.

4)Are there income limits for claiming the tax credit?
A: The credit is reduced for buyers with a modified adjusted gross income of more than $75,000 for single taxpayers and $150,000 for married couples filing a joint return. For those singles making $95,000 and married couples making $170,000, the tax credit is reduced to zero.

5)How does this tax credit differ from the last homebuyer tax credit?
A: The main difference is that this credit does NOT have to be repaid! Remember, the buyer must use the home as their principal residence for at least 3 years or face recapture of the tax credit.

6)How do I claim the tax credit?
A: This is easy! You claim the credit on your federal income tax return. Complete IRS form 5405 to determine your credit amount. Then, claim this amount on line 69 of your 1040 tax form. That is it!

7)Is there any way for a homebuyer to access the tax credit money sooner than waiting for their 2009 tax return?
A: Yes. Prospective homebuyers who qualify are permitted to reduce their income tax withholding. Reducing their withholding (up to the amount of the credit) will enable buyers to accumulate cash by raising his/her take home pay. This extra cash can be used as a down payment if the buyer budgets well. Contact your tax advisor if you are interested in this plan.

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