First Time Homebuyer Tax Credit

How much is the First Time Home Buyer Tax Credit?

• The lesser of 10% of  the purchase price of the home or $8,000.  Make sure you provide a copy of your HUD-1 closing statement to your tax advisor so that he can claim the appropriate amount on your tax return.

Who is Eligible?

• Home Buyer(s) who have not previously owned or purchased a home in the 3 year period prior to purchase with "purchase" meaning the day you occupy the home.
• Homeowner(s) who has purchased a home or constructed a new home between November 1, 2009 and April 30, 2010 with closing prior to June 30, 2010.

What Homes Qualify?

• Any home used as a principal residence.  Second homes and vacation homes do not qualify.
• Any new or previously constructed home, modular home, manufactured home, condo, or townhouse on your land or leased land.

Are there income limits?

• Modified Adjusted Gross Income up to $125,000 for single or head of household (single parent with children living with him/her); $250,000 for married homeowners/joint tax filers.  Credit is subject to phase-outs - review IRS Form 5405 to determine the size of your credit.  The credit will generally equal 10% of the purchase price up to a maximum of $8,000.

I heard the credit is refundable.  What does that mean?

• Refundable means the credit can be claimed on your tax return even if you, as taxpayer, have little or no federal income tax to offset the full amount of the credit.  If this applies to you, the IRS will include the unused portion of the credit in your income tax refund amount either paid by check or direct deposit to you.
• Should you sell this home within 3 years of claiming or receiving the credit you may have to pay the IRS back a portion or all of the received credit.

For which tax year is the credit available?

• Based on the purchase date of your home, you claim the credit on the current year tax return or the prior year tax return.  Consult your tax advisor for the further details specific to your facts and circumstances.

What costs associated with the home purchase count towards the credit?

• Any cost of construction, necessary for occupancy (doesn't include the purchase of personal property or contents of home), and necessary closing costs.  Consult IRS Form 5405 and your tax advisor for further details.

Can I purchase the home from related parties?  

• No.  You cannot purchase the home from other family members (siblings), ancestors (parents, grandparents, etc), lineal descendants (children, grandchildren, etc), your spouse, or spouse's family members (anyone who would be considered and "in-law").

Where can I learn more?

• Always consult your tax advisor with regards to tax planning specific to your facts and circumstances.
• The IRS website at http://www.irs.gov
• IRS Form 5405 at http://www.irs.gov/pub/irs-pdf/f5405.pdf?portlet=3 and corresponding instruction to the form at http://www.irs.gov/pub/irs-pdf/i5405.pdf?portlet=3