The New IRS Tax Credit

Highlights:

1. Credit is given for 10% of purchase price up to $800,000

2. Date of purchase 4/8/08- 12/1/09

3. Dollar for dollar credit for tax liability or refund in year claimed

4. Maximum income $75,000 annually for full credit schedule

5. “First time homebuyer” defined as not having owned any other home in the 3 year period prior to purchase.

(this section found on IRS.gov)

First-time homebuyers may be able to take advantage of a tax credit for homes purchased in 2008 or 2009. The credit:

· Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.

· Applies only to homes used as a taxpayer's principal residence.

· Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.

· Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The credit is claimed using Form 5405.

The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.