Tax Credit for First_time Home Buyers

Mortgage & Equity

Tax Credit for First-Time Home Buyers

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

For more information and answers regarding the tax credit for First-Time Home Buyers visit www.federalhousingtaxcredit.com. Or you can make an appointment (should be mortgage services email) with Mortgage Services at New Mexico Educators Federal Credit Union to determine if this policy can help you move into your first home.

Highlights of the Act:

The Act establishes a refundable tax credit (“Tax Credit”) for first-time home buyers (of a principal residence) of an amount equal to the lesser of 10% of the purchase price of the residence or $8,000, whichever is less.
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither of you or your spouse qualifies for the first-time home buyer tax credit. However, IRA Notice 2009-12 allows unmarried joint purchasers to 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. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
The Tax Credit will not apply if the home is purchased from a related person (i.e. relative).
You can claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS From 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for the 2009 return. No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. NOTE: you cannot claim the credit on the Form 5405 for an intended purchase for some future date; it must be a completed home purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.

As always, please consult with your tax advisor for information regarding your specific circumstances.