So, you just purchased your first home and you’ve heard something about a tax credit, but aren’t sure how to get the credit? Well, let me make the First Time Homebuyers credit simpler to understand. This is one tax credit where the name says it all- it is for first time homebuyers. That may seem simple, but let’s cover a few tricky situations. If you inherited a house from a relative, that counts as your first home. Any home purchased subsequently does not count toward this credit. If you purchased for the first time a modular home, a condo, a townhouse, or even a houseboat and it is your first owned primary residence, it counts as a first home. And, you are considered a ‘first time buyer’ if you did not own a residence during any of the prior 3 years.
There are two First Time Homebuyer credits that you hear about. Bush created one that was in effect through December 31, 2008. Bush’s maxed out at $7,500 and it was paid back by the taxpayer over 15 years. Obama’s tax credit came into play January 1, 2009, ends December 1, 2009, and it maxes out at $8,000. This version is not paid back unless you move within the first three (3) years. The value of this credit is the smaller of $8,000 or 10% of the purchase price of your home. So, if you buy a first home for $65,000, you are eligible for $6,500. If your home costs $150,000, then you receive the max, $8,000.
You can wait until next January to file for it, but why? Amending a tax return is an easy process for a tax preparer and it can score the money before January 2010. All you need is a copy of your originally filed tax return, and the closing document to show the date of closing and purchase price. The IRS now recommends that you send a copy of the closing document with the amended return as proof of purchase and close date. Currently, it is taking up to twelve weeks to receive the money, so again, why wait until January?
For married folks who file together and earn between $75,000 and $150,000, definitely see a tax preparer, as the credit begins to phase out for you. And for folks who are married, but file separately, the max credit is $4,000, because each of you could get $4,000 on your return which equals the $8,000 that those who file together can get. Now, isn’t that a bit simpler?