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Buying
a new home can be as smooth as ever with our Get
Your House In Order program. Simply gather the information
below before meeting with your Freedmont Loan Consultant.
You'll be surprised how quick and easy the process
can be... even for First-time Homebuyers!
PLUS if you are a First-time Homebuyer,
you may qualify
for an $8,000.00 tax credit!
Quick Summary of the First-Time Homebuyer Credit
- For 2008: up to $7,500, the credit is paid back over
15 years.
- For 2009: up to $8,000, the credit does not need
to be paid back.
- "First-time" buyer means
an individual who has not owned a principal residence
in previous three
years.
Dollar Amounts of the Homebuyer Tax Credit
The tax credit is worth 10% of the purchase price of
the home. For 2008, the maximum credit is $7,500 ($3,750
for married couples filing separate returns). The credit
is also limited to the same $7,500 maximum for unmarried
persons who purchase a residence together.
For 2009, the maximum credit is $8,000 (or $4,000 for
married couples filing separately).
Qualifying as a First-Time Homebuyer
For the purpose of this tax credit, a first-time homebuyer
is defined as someone who has not owned a primary residence
in the three-year period ending on the date of purchasing
the home.
Limited Time Period for Purchasing a Residence
The credit has a very limited life-span. Individuals
will need to purchase a residence after April 9, 2008,
and before December 1, 2009.
What's a Primary Residence
A primary residence is a residence in which an individual
lives most of the time. A primary residence can be a
house, condominium, co-operative apartment, houseboat,
or mobile home.
Because the tax credit is for people who purchase their
primary residence, individuals may qualify for the tax
credit even if they own a vacation home or rental property
as long as those properties were not their primary residence
for at least three years preceding the purchase of their
new home.
Income Phase-out Range
The credit is phased out for individuals with modified
adjusted gross income between $75,000 and $95,000. For
married couples filing a joint return, the phase out
range is $150,000 to $170,000.
Modified AGI for the First-Time Homebuyer Credit
To determine if the tax credit is reduced or eliminated
by the income phase-out range, individuals will need
to determine their modified adjusted gross income.
For the purposes of determining income eligibility for
this credit, adjusted gross income is modified by adding
back the following excluded income:
- foreign earned income;
- income from Guam, American Samoa, or the
Northern Mariana Islands;
- income from Puerto Rico.
When to Claim the Credit
The credit is fully refundable, meaning taxpayers will
be able to obtain an additional federal tax refund of
up to $7,500 even if they have no other tax liabilities.
Taxpayers will be able to claim the credit on their
2008 tax return for homes purchased in 2008. For homes
purchased in 2009, the IRS will allow the purchasers
to file an amended 2008 return to claim the credit. For
the 2009 tax credit to show up on the 2008 return, taxpayers
will need to elect to treat the 2009 home purchase as
if it were made on December 31, 2008. Guidance
released by the IRS provides that taxpayers making this election
are eligible for the higher $8,000 tax credit amount
and do not need to repay the credit if they take their
2009 credit on their 2008 tax return.
Repaying the First-Time Homebuyer Credit
The credit needs to be repaid in equal installments
over 15 years. Unlike any other tax credit, the first-time
homebuyer credit must be repaid over 15 years. This pay-back
feature applies only to homes purchased in 2008. The
credit will works like this: you'll get your refund when
you file the tax return. Then the credit will be repaid
as an additional tax on your tax return for the next
fifteen years, starting with the 2010 tax return. For
the maximum $7,500 credit, this works out to annual repayments
of $500 per year. As CCH notes in their tax briefing,
this tax credit amounts to an interest-free 15-year loan
for first-time homebuyers.
The credit will also need to be repaid in full if the
taxpayer sells the house within the fifteen-year repayment
period. The credit also needs to be repaid in full if
the property is no longer the taxpayer's primary residence.
The credit will be disallowed if a taxpayer sells the
house before the end of the same year in which the house
was purchased.
Tax Form to Claim the First-Time Homebuyer Credit
Form
5405 (pdf, 3 pages including instructions)
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