September 21, 2009
First-time home buyers still have time to cash in on the
government's $8,000 tax credit, but they'd better hurry. Only home
purchase transactions that close before November 30, 2009 are
eligible.
The tax credit is contained in the American Recovery and Reinvestment Act, passed to stimulate home purchases. The Internal Revenue Service says more than 1.4 million taxpayers so far have taken advantage of the credit.
If you currently own a home, or have owned a home within the last three years, you won't qualify. But for others, the program makes purchasing a house that much more affordable.
The credit of up to $8,000 is generally available to homebuyers with qualifying income and who meet the above requirements.
While the IRS has encouraged all eligible homebuyers to take advantage of the first-time homebuyer credit, the agency acknowledges misinformation about the program can lead to fraud. It has cautioned taxpayers to avoid schemes that help ineligible people file false claims for the credit. Currently, the agency said it is investigating a number of cases of potential fraud and is using computer screening tools to identify questionable claims for the credit.
Since a home closing can sometimes take 60 days, home buyers have little time to lose. Closings are often completed in less time, but the IRS says buyers who are counting on the credit should plan for the worst.
The credit cannot be claimed until after the purchase is completed. For purchases made this year before Dec. 1, taxpayers have the option of claiming the credit on their 2008 returns or waiting until next year and claiming it on their 2009 returns.
The credit is 10 percent of the purchase price of the home, with a maximum available credit of $8,000 for either a single taxpayer or a married couple filing jointly. The limit is $4,000 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $80,000 or more.
The credit reduces the taxpayer's tax bill or increases his or her refund, dollar for dollar. Unlike most tax credits, the first-time home buyer credit is fully refundable. This means that the credit will be paid to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
There's one other consideration. If you take the $8,000 tax credit and sell or rent the home within three years, you will be required to repay the $8,000 to the IRS. So make sure you're going to live in the home for a while before signing on the dotted line.
