First time homebuyers- Uncle Sam’s limited time offer of up to $8,000:

First time homebuyers or anyone not owning a main residence in the past 3 years might be in luck this summer. The American Recovery and Reinvestment Act of 2009 included a provision providing for an $8,000 tax credit for home purchases between January 1, 2009 and December 1, 2009. The income tax credit is 10% of the home purchase price with a maximum $8,000. Income limitation applies as the situation with any tax credit. In this case, for single individuals, the tax credit is phased-out (reduced) for individuals with income of $75,000 for single filers and $150,000 for married couples. The first-time homebuyers’ tax credit is completely phased out to Zero for single filers with income of $95,000 and $170,000 for married couples.

The 2009 first time homebuyers’ tax credit is different than the one enacted in 2008. The 2008 credit of up to $7,500 on home purchases between April 9, 2008 and before July 1, 2009 was to be recaptured over 15 years ratably with no interest unless the home is sold earlier than 15 years. As a result, the 2008 first time homebuyers credit was considered an interest free loan by Uncle Sam as opposed to a true tax credit as the current tax credit.

Planning point: For home purchases by first time homebuyers between January 1 and July 1 of 2009, if you filed your 2008 income tax return claiming the tax credit under the 2008 tax law, consult your tax advisor and preparer, and consider amending your tax return to claim the 2009 tax credit.

This tax credit significance lies in the value of a tax credit vs. tax deduction. A tax deduction is merely lowering your income providing you with a proportionate percentage equal to your top tax rate. Whereas with the tax credit your tax liability is reduced dollar for dollar. For example, if you are in the 25% tax bracket, your deduction will reduce your taxes by 25 cents on the dollar vs. your tax credit providing you with $1 for $1 deduction.

Moreover, the first time homebuyer’s tax credit is a refundable tax credit. This means, if you owe low to no income tax liability to reduce, Uncle Sam will send you a check with the difference .…. Enjoy your new home.
For more information on this credit check out the following link: http://www.federalhousingtaxcredit.com/2009/faq.php