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TAX CREDIT 2009 |
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Who
is Considered a First Time Home Buyer? There are other scenarios to
consider! First, anyone who has not owned a home within the last 3 years.
If they sold a home 3 years ago, the date on the HUD 1 is the determining
factor. For a married couple, if one person
owned a home within the last 3 years and the other did not, they don’t
qualify for the tax credit. However, if an unmarried couple
jointly buys a home, and one person owned a home (within 3 years) and the
other did not, they can “designate” the tax credit to that person who
will be able to claim it on their individual tax return. This rule also
applies for parents to co-sign on a mortgage. The parents own a home. The
son or daughter is FTHB—the child can claim the tax credit. Okay, one more scenario. If the FTHB
owns a vacation home or rental property, which was not used as a primary
residence within the last 3 years, they may qualify but will have to be
able to prove it! A non-US citizen, who meets
resident-alien status (defined by the IRS Publication 519) is also
eligible as long as they meet the requirements above and income limits. Types
of Homes Pretty much any type of home
qualifies—as long as it is a principal residence (as defined by the
IRS). Single family, town homes and condos, manufactures or mobile homes
and yes, houseboats all qualify! A newly constructed home purchased from a
homebuilder is determined by the date on the HUD 1. However, If a borrower is building a
home (for a principal residence) and owned the land prior to January 1,
2009, the tax code says that the “purchase date” is the date that the
owner “first occupies” the home which must be between January 1 and
December 1, 2009. Is
It a Tax Credit or a Loan? If someone purchased a home between
April 9 and December 31, 2008, they called it a “tax credit” because
you get the tax credit money upfront—but it really was an
“interest-free” loan which is paid back for the next 15 years or upon
the sale of the home (within 3 years of purchase). The “payback” is
based upon the balance owed and not the entire tax credit received. The next set of rules applies if a
home is purchased between January 1 and December 1, 2009. It is a true tax
credit and does not have to be repaid. However, if the home is sold within
3 years of the purchase date, the entire tax credit has to be paid
back. IRS Form 5405 called First Time Home
Buyer Credit is the one used to claim the tax credit! How
the Dollar Amount of Tax Credit is Figured Simply calculation here: 10% of the
home’s purchase price or a maximum of $8000. A tax credit can be claimed
regardless if they obtain a mortgage, a tax-revenue mortgage or the buyer
paid cash when purchasing the home. However, partial tax credits can be
claimed – See Income Limits paragraph. Income
Limits This is a little more complicated and
first-time homebuyers should seek advice from a tax expert. Here is the
“simple” explanation based on several scenarios but keep in mind that
the magic income number is always based on Modified ADJUSTED GROSS INCOME
(MAGI). You will find that the MAGI income on the following lines of the 3
tax forms. IRS
1040 Form - line #37 Single
taxpayer: MAGI of $75,000 or less There is a little-known provision in
the American Recovery & Reinvestment Act of 2009 that authorizes a
PARTIAL TAX CREDIT if a first-time homebuyers’ income EXCEEDS the
adjusted gross income (AGI) limit of $75,000 for a single person and
$150,000 for a married couple. A “tax credit formula” has been created
to determine the dollar amount. Two important things you need to
know: 1.
“Income” is defined as
the Adjusted Gross Income “line” on 1040, 1040A and 1040EZ. Yes, it
actually says those words within the line item. 2.
The “Partial Tax Credit
Income Cap” is $20,000 — and by the way, that’s the dollar basis for
the formula we’re about to share with you. Example: Married
Couple’s AGI is $159,000 Yes, $4,400 is the tax credit this
couple can get–even when their income exceed the so-called maximum
income amount. Even at $19,000 over the AGI, this couple could still get a
$400 tax credit! Use the exact formula for a single homebuyer! Now, here’s the biggie: Taxpayers
can choose to claim their tax credit on either their 2008 tax returns or
wait until the 2009 tax year to file. For example, if they exceed the
income limit in 2008 (which would only qualify them for a partial credit)
but their income has been decreased in 2009 due to a temporary layoff or
cut back in over time, they can wait until 2009 to claim the tax credit
(for the full tax credit). Potpourri For home buyers who do not want to
wait until the end of the year to claim their tax credit, they should
consider filing a W-4 form with their employer, decreasing the amount
withheld for federal taxes. They may not get a check at the end of the
year, but it will increase the dollar amount of their paycheck. Another option for FTHB’s is to
borrower the dollar amount of the expected tax credit from a relative
(usually a parent) and pay it back when the tax credit is received. It
could be used towards down payment and closing costs and FHA and VA will
allow it. Be sure to check with the lender and the documentation required.
“Do
Better Business…. The Carroll Way!”
April
2009 |