First-time Homebuyer Tax Credit

As Fall has arrived and Winter will soon be upon us, I am reminded that the first-time homebuyer Federal tax credit will expire on 1 December 2009, so first-time homebuyers should be mindful of this date to ensure that they are closing on their purchase by no later than this date. There are also several other important facts regarding this credit:

• Applies to purchases that close after 8 April 2008, and before 1 December 2009.
• Applies only to homes used as an individual's principal residence.
• Reduces an individual's tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning the credit will be paid out to eligible individuals, even if they owe no tax or the credit is more than the tax owed.

In order to claim the credit, a buyer must file Form 5405 along with his or her Federal income tax return.

What if you bought your home in 2008 but prior to 8 April 2008?
The Housing and Economic Recovery Act of 2008 established a tax credit (which is actually a no-interest loan to be repaid in 15 equal, annual installments beginning with the 2010 income tax year) for first-time homebuyers that is worth up to $7,500.

For 2009 Home Purchases

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases that closed between 8 April 2008 and 1 December 2009, and the credit does not have to be paid back unless the home ceases to be the individual's principal residence within a three-year period following the closing. Currently, first-time homebuyers who purchase a home in 2009 can claim the credit on either an amended 2008 tax return, or a 2009 tax return, due April 15, 2010. In no event may the credit be claimed before the closing date of the purchase. IRS News release 2009-27 has more information on these options.

There are certain aspects of the tax credit, e.g., income limit restrictions, married filing joint vs. married filing separate status, and percentage ownership, which apply, so you should consult a tax professional for advice on your specific situation. An unmarried couple would qualify for the tax credit, however, the amount that each individual could claim would depend on the percentage ownership of the specific individual in the residence and that amount of the credit would be included on that specific individual's individual tax return.

So, rake the leaves in your lawn and the rake in the benefits that Uncle Sam is providing to you as a first-time homebuyer!

For more information on this topic, go to: http://www.irs.gov/newsroom/article/0,,id=187935,00.html

This Blog is not intended to be legal or tax advice and readers of this Blog should consult their own lawyer or tax preparer for legal or tax advice, as applicable.