Understanding the First Time Homebuyer Tax Credit

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    Understanding the First Time Homebuyer Tax Credit - Presentation Transcript

    1. A Complete Guide to Qualifying for and Understanding the First Time Homebuyer Tax Credit H.R. 3221 – Economic Stimulus and Housing Recovery Act of 2008 - $7,500 H.R. 1 – American Recovery and Reinvestment Act of 2009 - $8,000 Revised
    2. The $7,500 First Time Homebuyer Tax Credit
      • The original tax credit was introduced with H.R. 3221 - The Economic Stimulus and Housing Recovery Act of 2008
      • 10% of the Purchase Price up to $7,500 for single and joint taxpayers
      • Married filing separate may claim $3,750
      • Purchased between April 8 th 2008 and before July 1 st 2009
      • Interest Free loan paid back over 15 years beginning 2 years after credit is claimed
      • Purchase loans using by Mortgage Revenue Bonds are ineligible for credit - CalHFA
    3. The $8,000 First Time Homebuyer Tax Credit
      • H.R.1-The American Recovery and Reinvestment Act revises the First Time Homebuyer Tax Credit
      • 10% of the Purchase Price up to $8,000 for single and joint taxpayers
      • Married filing separate may claim $4,000
      • Purchased after December 31 st 2009 and before December 1 st 2009
      • Not paid back – No recapture if home is lived in as main home for at least 3 years
      • Purchase loans using Mortgage Revenue Bonds are eligible for Homebuyer Credit - CalHFA
    4. IRS Guidelines - Qualifying for the Tax Credit
      • Occupancy and Property Type
      • Must purchase a “main home” – Primary residence
        • Main home - Your main home is the one you live in most of the time. It can be a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence
        • New construction – Purchase date treated as first date you occupy home
      • Must be a First Time Homebuyer
        • Can not have owned another primary home within 3 years of the closing date of new home
        • May own other homes or properties as long as you have never lived in it as your main home
    5. IRS Guidelines - Qualifying for the Tax Credit
      • Maximum income limits – Phase out maximums
      • Married filing joint - $150,000 – Eligible for full credit
        • Phase out begins when MAGI exceeds limit – reduce credit
          • Phase out at $195,000
      • Single filing status - $75,000 – Eligible for full credit
        • Phase out begins when MAGI exceeds limit – reduce credit
          • Phase out at $95,000
      • Occupying home as Joint Tenants
        • If you purchase home under joint tenancy and down payment and ownership are not equal
          • Tax credit will be claimed in proportion to ownership in residence
    6. IRS Guidelines - Qualifying for the Tax Credit
      • You Cannot Claim Tax Credit if any of these apply
      • Your modified adjusted gross income (MAGI) exceeds phase out income maximum limits
      • You are a nonresident alien
      • Your home is located outside the United States
      • You sell the home, or it ceases to be your main home before the end of 2009
        • Recapture applicable if you sell within 3 years of purchase
      • You acquired your home through gift or inheritance
      • You acquired your home from a related person:
        • Spouse, ancestors (parents, grandparents,etc.)
        • Lineal descendants (children, grandchildren, etc.)
        • A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation.
        • A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest
    7. IRS Guidelines - Qualifying for the Tax Credit
      • Claiming the First Time Homebuyer Credit
      • IRS Form 5405 – Attached to 1040
      • A main home purchased in 2008 is only eligible for $7,500 tax credit and may be claimed on 2008 return
      • A main home purchased in 2009 is eligible for $8,000 tax credit and may be claimed on 2008 (or amended 2008) or 2009 tax return
      • CANNOT claim the credit prior to purchase of home
        • 5404 required address of home qualifying for the credit
        • 5404 requires date home acquired
        • Lying on tax return is a federal offense – not worth it
      • You may adjust your W4 withholdings in anticipation of claiming credit on 2009 tax return

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