Homebuyer Tax Credits
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What are homebuyer tax credits?
Homebuyer tax credits are tax credits refunded to homebuyers who purchase a home between April 8, 2008 and April 30, 2010. There are three primary types of tax credits relevant to this time period:
- The Housing and Economic Recovery Act of 2008 provided for a tax credit worth up to $7,500 for homes purchased during 2008. The tax credit is similar to a 15-year, no interest loan and must be repaid in installments beginning in 2010.
- The American Recovery and Reinvestment Act (ARRA) of 2009 expanded the first time homebuyer tax credit to $8,000 for home purchases made in 2009. This tax credit does not need to be repaid in most cases.
- The Worker, Homeownership and Business Assistance Act of 2009 extends and expands the first-time homebuyer credit allowed by the above laws. Under the new law, an eligible taxpayer must buy, or enter into a contract to buy, a home between November 7, 2009 and before April 30, 2010 and close on the home by June 30, 2010. Taxpayers may claim the credit on either their 2009 or 2010 return. The tax credit is up to $6,500 and does not need to be repaid in most cases.
Am I eligible?
To be eligible, the home must be your principal residence. Additionally, you must be a homebuyer who:
- has not owned a house the past three years OR have owned the same main residence for five of the past eight years if claiming the credit for a home purchased between November 7, 2009 and April 30, 2010
- is a citizen or a resident alien as defined by the IRS
- did not buy the home from a person related to you
- meets the following income guidelines:
| |
For home purchases between April 8, 2008 and November 6, 2009 |
For home purchases between April 8, 2008 and November 6, 2009 |
For home purchases between November 7, 2009 and April 30, 2010 |
| Filing status |
Full credit income limits |
Partial credit income limits |
Full credit income limits |
| Single or head-of-household |
less than $75,000 |
$75,000-$95,000 |
$125,000-$145,000 |
| Married filing jointly |
less than $150,000 |
$150,000-$170,000 |
$225,000-$245,000 |
You must own and live in the home for at least three years.
How do I apply?
The tax credit must be claimed on your federal income tax return.
- First time homebuyers may claim the 2009 tax credit on 2008 tax returns if the home was purchased prior to April 15 or the tax return may be claimed on the 2009 tax return due April 15, 2010.
- First time homebuyers or homebuyers who have owned the same principal residence for five of the past eight years may claim the credit for a purchase between November 7, 2009 and April 30, 2010 on their 2009 or 2010 tax returns.
The credit may not be claimed prior to the closing date of the home purchase.
The credit is claimed on IRS Form 5405. (Note: Opens a PDF file.)
What are the benefits?
The tax credit reduces your tax bill or increases your refund dollar for dollar. In 2008, the tax credit is up to $7,500 and in 2009 the tax credit is up to $8,000; for the time period November 7, 2009 through April 30, 2010, the tax credit is up to $6,500.
Do I have to pay back the credit?
If you bought a home after April 8, 2008 and before July 1, 2009 and claimed the 2008 tax credit, you need to pay back the credit in 15 equal annual payments at 0% interest beginning with your 2010 tax return.
If you bought a home after January 1, 2009 and before May 1, 2010 and claimed the 2009 or 2010 tax credits you do not need to pay back the tax credit unless the home ceases to be your main residence within a three year period following the purchase.
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