With all the buzz surrounding the credit for first time home buyer’s that the American Recovery and Reinvestment Act of 2009 includes, it may be hard to decipher all the details to see who and what exactly are included. This Act is summarized as “A bill to create jobs, restore economic growth, and strengthen America's middle class through measures that modernize the nation's infrastructure, enhance America's energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief, and protect those in greatest need, and for other purposes.”
According to a recent news release by the U.S. Department of the Treasury, home buyers who qualify can now take advantage of the stimulus package for their 2008 taxes, which need to be filed by April 15. An important thing to be aware of is that automatic extensions can be issued to many taxpayers until October 15, which would allow the credit to be available earlier. The estimated tax liability must be paid when the extension is filed. Those who qualify may also apply the tax credit towards their 2009 taxes.
"For first-time home buyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit. This important change gives qualifying home buyers cash they do not have to pay back," said Doug Shulman, IRS Commissioner.
Here are the specifics:
Who: Any first time home buyer, defined as an individual who has not owned a home in the previous three years. If the buyer is a married couple, both spouses must meet the individual qualifications. Unmarried couples, where one meets the qualifications but the other does not, may assign the tax credit to the one who qualifies.
There are also restrictions due to a person’s Modified Adjusted Gross Income, or MAGI. Modified Adjusted Gross Income (MAGI) is an individual’s Adjusted Gross Income with certain amounts added back such as foreign income, foreign-housing deductions, student loan deductions, IRA contributions and deductions for higher-education costs. To determine this with certainty, a visit to a qualified tax accountant would be essential.
The tax credit is available to for individuals whose Modified Adjusted Gross Income (MAGI) is $75,000 or less, and married couples with a MAGI of $150,000 or less. If a person purchases in 2009 and can show that they will qualify for the tax credit they can have their employer reduce their payroll deductions per pay period thereby realizing some or all of the credit during 2009. Also, if the tax credit exceeds the income tax due, the difference will be refunded to the tax payer.
Individuals whose MAGI is more than $75,000 but less than $95,000 qualify for a pro-rated portion of the potential $8,000 credit. Married couples whose MAGI is more than $150,000 but less than $170,000 qualifies for a pro-rated portion on the tax credit.
Individuals who have a MAGI of $95,000 or more and married couples who have a MAGI of $170,000 or more do not qualify for the tax credit. Resident aliens and nonresident aliens may qualify for this tax credit.
What: The tax credit is 10% of the purchase price or $8,000-whichever is less on home purchases made before Dec. 1, 2009. New construction, condominiums, manufactured housing and even house boats qualify. The tax payer/owner must own and occupy the home for three years to not have to repay the credit.
When: Now until Dec. 1, 2009 for purchases, filing for the actual credit extends until April 15, 2010 when 2009 taxes will need to be filed.
How: After purchasing, new owner would need to file Form 5405, which can be found at the above link.