2009 Tax Credits
One of the few good things to come out of the dismal economy and the disastrous housing market has been the American Recovery and Reinvestment Act of 2009, which authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.
Several provisions of this act make it especially valuable. Perhaps the most important is the very liberal definition of a "first-time home buyer." Basically, if you have not owned a home as a principal residence for three or more years, you qualify for the tax credit. For married taxpayers, both must meet this test. If one has owned a principal residence within the past three years, neither one qualifies for the credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.
Second, any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes or mobile homes, and houseboats. Even a recreational vehicle, if used as a principle residence (as happens when owners travel full-time and live in their vehicle), will qualify. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000/$500,000 capital gain tax exclusion for principal residences.
Finally, the credit is fully refundable, even if you do not have any taxable income. You may even file a return solely for the purpose of claiming the credit.
You cannot purchase a home from your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.), or your spouse. Also, vacation homes or rental property do not qualify for the credit--but a home you build rather than purchase does qualify.
The credit is phased out for higher-income taxpayers. For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the range is $75,000 to $95,000.
If you sell your home before the end of the year, you are not eligible. And if you have claimed the credit but cease to use your home as your principle residence within 36 months, you must repay it. It becomes a tax obligation in the year the home stops being your principle residence, and is repaid via your tax return for that year.
The tax credit is equal to 10 percent of the home’s purchase price up to $8,000, and you claim it on your federal income tax return. IRS Form 5405 is used to determine the tax credit amount, and it is claimed on line 67 of the 1040 income tax form for 2009 returns. No other applications or forms are required, and no pre-approval is necessary.
Please consult with your own qualified tax advisor to be sure you have the most up-to-date and accurate information, but don't miss out on this great opportunity.
SIDEBAR:
For more detailed information on the 2008 and 2009 first-time home buyer tax credits,
visit the IRS at
http://www.irs.gov/newsroom/article/0,,id=204671,00.html
Another useful source of information is the Suite 101 tax planning guide:
http://personal-taxplanning.suite101.com/article.cfm/irs_form_5405_firsttime_home_buyer_credit
And when you've bought that new home, populate it with Energy Star appliances and get rebates and other rewards. Find out what's available here:
http://www.energystar.gov/index.cfm?fuseaction=rebate.rebate_locator
http://www.dsireusa.org/