Finance & Enjoyment Blog

For those of you considering taking the plunge into home ownership, there may be no better time to buy then right now.

With the depressed housing market and foreclosures at an all time high, many individuals are looking to take part in the American dream and become first-time homebuyers. In order to help facilitate you, the American Recovery and Reinvestment Act of 2009 (ARRA) has enhanced the first-time homebuyer credit for those who are eligible to take it.

 
Who can take the credit?
An individual is considered a first-time homebuyer if he (or spouse, if married) had no present ownership interest in a principal residence in the United States during the 3-year period before the purchase of the home to which the credit applies.

The credit phases out for individual taxpayers with modified adjusted gross income between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of http://www.kkb-cpa.com/tax-planningpurchase.

 
How much is the credit?
An eligible first-time homebuyer can claim a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $8,000. The maximum credit is reduced for married individuals filing separately to $4,000.

If the home ceases to be the individual’s principal residence within 36 months from the date of purchase, the full amount of the credit received becomes due on the tax return for the year the home ceased being the individual’s principal residence.

What homes qualify for the credit?
Any home purchased as a primary residence and located in the United States will qualify for the credit. The home must be purchased after April 8, 2008, and before December 1, 2009. If the home is constructed, the purchase date is considered to be the first date the home is occupied. Vacation homes, rental properties and homes located in United States territories do not qualify for the credit.
 
How do you claim the credit?
The credit is claimed by attaching Form 5405 to an originally filed or amended 2008 tax return or 2009 tax return.

If an individual has already filed their 2008 income tax return claiming the pre-ARRA credit of $7,500 that was required to be recaptured ratably over fifteen years can file an amended return to claim the $8,000 credit that doesn’t have to be repaid.

There are many caveats that an individual should be aware of when claiming the first-time homebuyer credit. The IRS has posted a number of questions and answers on their website at http://www.irs.gov/newsroom/article/0,,id=187935,00.html that will help individuals understand further who can and cannot claim the credit.

You can also contact our office at 303-815-1100 for further assistance.

 


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