$8,000 First-Time Home Buyer Tax Credit

There has been a lie-low in the market nowadays. This has been attributed to both the changes in the economic condition and the change in the people’s viewpoint regarding market issues. The latter is a variable that appeals most firms’ interests. To know it, they conducted researches that will point out possible neurological factors that influences the people’s perception about market. However, in their pursuit, they fail to realize that there are certain answers for free right from the testimonies of willing customers.

If you are planning to be a first-time home buyer this year, then you may want to take advantage of a new $8,000 tax credit. However, certain rules govern it so understanding these rules is essential for you to avail its advantages.

The deduction is worth 10 percent of a home’s value up to $8,000. This means that if you buy a $60,000 home – your credit will be $6,000. It also means that all homes purchased for more than $80,000 may qualify for the maximum credit amount of $8,000.

Another one is that there is an income limit for a full tax credit. A married couples’ modified adjusted gross income or MAGI should not exceed $150,000. On the other hand, for those single filers’ MAGI, it should be less than $75,000. Yet, having exceeded on those said amounts does not mean that people will not have the opportunity to avail. To be eligible for a partial tax credit, married couples must have a modified adjusted gross income over $150,000 but under $170,000 and single filers with incomes over $75,000 but under $95,000.

Well, of course there is a difference when married couples file separately; both will claim 5 percent of the home’s purchase price on their tax returns. This means that for a home purchased at $80,000 or more, each can receive a $4,000 credit each.

More than that, there are also other issues to consider.

  1. Tax credit not tax deduction

Tax credit means the entire amount goes back to the first-time home buyer. On the other hand, tax deductions such as mortgage interests are subtracted from gross income before tax is calculated and reduce your taxable income. If qualified for $8,000, the buyer gets $8,000; even if they would not owe that much in taxes otherwise.

2. The tax credit applies to homes purchased between Jan. 1, 2009, and Dec. 1, 2009.

Because it is a tax credit, it does not require you to pay back and thus providing the home buyer keeps the property for at least 36 months and resides in the home.

3. To qualify as a first time home buyer, a purchaser must have not owned a home within the previous three year period. But, this does not forbid a buyer from owning a vacation house or a rental home. If purchasing a new home, the effective date to receive the credit is the first day the homeowner actually lives in the house. If construction began in 2008, that buyer could still qualify. And if construction begins in 2009, but the owner does not take possession until 2010, the buyer would not qualify.

4. The tax credit is not a down payment, but it could be used toward a down payment if first-time homebuyers plan ahead.

If the taxpayer does not buy a home in the qualifying period, they could still owe the IRS the money, and reducing their withholding amount could result in a high bill at tax time.

Comments on this entry are closed.