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First Time Home Purchase


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First Time Home Purchase

  1. 1. Ameriprise Financial Greg Younger, CRPC® 14755 N. Outer Understanding the Chesterfield, MO 63017 636.534.2092 First-Time Homebuyer Tax Credit April 21, 2009
  2. 2. Ameriprise Financial Page 2 Understanding the First-Time Homebuyer Tax Credit If you recently purchased a first home, or intend to purchase a first home in the next few months, you may stand to benefit from the first-time homebuyer tax credit provisions included in the recently signed American Recovery and Reinvestment Act. When it comes to the first-time homebuyer tax credit, though, there's quite a bit of confusion. So it's worth taking a few minutes to make sure you understand how the credit works, and the time period to which it applies. First, the credit isn't new: Back in July of 2008, the Housing and Economic Recovery Act established a temporary refundable first-time homebuyer credit equal to 10% of the purchase price of a principal residence, up to $7,500 ($3,750 if married filing separately). The credit applied to first-time homebuyers who purchased a home on or after April 9, 2008, and before July 1, 2009. Generally, you qualified as a first-time homebuyer if you, and your spouse if you were married, did not own any other principal residence during the 3-year period ending on the date of purchase. The credit was phased out for individuals with higher incomes, and had to be paid back over 15 years in equal installments (repayment would be accelerated if the home were to be sold during the 15-year period or if the home ceased to be the principal residence of you or your spouse during that time). The new legislation extends the credit to homes purchased by qualified first-time homebuyers through November 30, 2009. The new legislation also expands the credit. The credit remains 10% of the purchase price of the home, but the dollar limit has increased to $8,000 (the cap for married individuals filing separate returns is half that amount) for home purchases made after December 31, 2008, and before December 1, 2009. In addition, if you qualify for the credit as the result of a home purchase in 2009, you don't have to pay it back over time, provided the home remains your principal residence for 36 months. The American Recovery and Reinvestment Act continues to allow you to elect to report a qualifying home purchase made in 2009 as if it occurred on December 31, 2008 (allowing you to claim the credit on your 2008 federal income tax return). Unfortunately for many, the new legislation also continues to eliminate the credit for those with higher incomes. The credit is reduced if your modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 if you're married and file a joint return) and is completely eliminated if your MAGI reaches $95,000 ($170,000 if you're married and file a joint return). Summary of rules for qualifying first-time homebuyers, by purchase date When was home purchased? April 9, 2008 through December January 1, 2009 through 31, 2008 November 30, 2009 Maximum credit $7,500 ($3,750 if married filing $8,000 ($4,000 if married filing separately) separately) Does credit have to be paid back? Yes--generally, over 15 years in No, provided the home remains equal installments your principal residence for 36 months See disclaimer on final page April 21, 2009
  3. 3. Ameriprise Financial Page 3 Credit is claimed on tax return for 2008 federal income tax return You can elect to treat the what year? purchase of the home as if it occurred on December 31, 2008, claiming credit on 2008 tax return ($8,000 maximum credit limit still applies even if reported on 2008 return); otherwise, credit is claimed on 2009 tax return. Credit phased out for higher Yes Yes incomes? See disclaimer on final page April 21, 2009
  4. 4. Page 4 Ameriprise Financial The information contained in this material is being provided for general education purposes and with the understanding that it is not intended to be used or interpreted Greg Younger, CRPC® as specific legal, tax or investment advice. It does not address or account for your 14755 N. Outer individual investor circumstances. Investment decisions should always be made Chesterfield, MO 63017 based on your specific financial needs and objectives, goals, time horizon and risk 636.534.2092 tolerance. The information contained in this communication, including attachments, may be provided to support the marketing of a particular product or service. You cannot rely on this to avoid tax penalties that may be imposed under the Internal Revenue Code. Consult your tax advisor or attorney regarding tax issues specific to your circumstances. Neither Ameriprise Financial Services, Inc. nor any of its employees or representatives are authorized to give legal or tax advice. You are encouraged to seek the guidance of your own personal legal or tax counsel. Ameriprise Financial Services, Inc. Member FINRA and SIPC. The information in this document is provided by a third party and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial Services, Inc. While the publisher has been diligent in attempting to provide accurate information, the accuracy of the information cannot be guaranteed. Laws and regulations change frequently, and are subject to differing legal interpretations. Accordingly, neither the publisher nor any of its licensees or their distributees shall be liable for any loss or damage caused, or alleged to have been caused, by the use or reliance upon this service. Prepared by Forefield Inc. Copyright 2009 Forefield Inc.