Do You Qualify for the $8000

First Time Home Buyer Tax Credit?

 

 

First time home buyer is defined as the following:

  • Cannot have owned a principal residence during the 3-year period before purchase of new main home.
  • New main home must be located in the U.S.
  • Purchase must be made before 12/1/2009
  • Modified adjusted gross income cannot exceed $95,000 ($170,000 for joint filers)

Main Home Defined:

  • House
  • Houseboat
  • Condominium
  • Cooperative Apartment
  • Mobile Home
  • New Construction (treated as purchased on date first occupied such residence)

Credit Dollar Limitation:

  • 10% of the purchase price not to exceed $8000
  • Married individuals filing separate shall be entitled to 1/2 of maximum credit
  • Unmarried individuals can allocated credit among themselves in such manner that does not exceed $8000

MAGI Limitation:

  • MAGI = Modified Adjusted Gross Income
  • Credit begins to phase -out when MAGI exceeds $75,000 ($150,000 if filing jointly)
  • Credit is completely phased out when MAGI is $95,000 ($170,000 if married filing jointly)

Recapture of Credit:

  • Must repay credit only if home ceases to be main home within 36 month period after purchase date
  • Events that cause recapture are: sale of home, convert to business or rental property, involuntarly conversion (condemnation)

Exceptions to Recapture:

  • Home is sold to unrelated party - recapture is limited to gain on the sale
  • Under condemnation - new main home is accquired within 2 years of the event
  • Home transfer in divorce - spouse who received home is responsible for repaying credit
  • Death - repayment is not required - surviving spouse is  required to repay their half

Credit is Unavailable:

  • Nonresident Alien
  • Home acquired by gift or inheritance
  • Home acquired from related person (spouse, ancestors, lineal descendants, corporation which you directly own more than 50% stock, partnership which you own directly or indirectly more than 50% interest

Claiming Credit

  • Must file tax return to claim credit
  • Form 5405 is used to claim credit
  • Can ammend 2008 return to claim credit for 2009 main home purchase