First Time Home Buyers Tax Credit FAQ
For all new home buyers that purchase homes for their primary residence after January 1, 2009 and before December 1, 2009 now are eligible for an $8000 tax credit! Get on board now with your new Goldendale real estate.
Below are some frequently asked questions about the 2009 tax credit
1. What’s this new homebuyer tax incentive for 2009?
Any home that is bought for $80,000 or more is eligable for an entirel $8000 tax credit. If your Goldendale real estate costs less than $80,000, the tax credit will be 10% of the cost. Thus, if a buyer purchased a home for $75,000, the tax credit would be $7500. It is available for the purchase of a primary residence on or after January 1, 2009 and before December 1, 2009.
2. Who is eligible?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any home ownership interest in a home in the three years previous to the day of the 2009 purchase.
3. How does a tax credit work?
This is not like a deductible but actually a credit where each dollar of the credit is deducted from the income. Credits are claimed on an individual’s income tax return. Thus, a qualified buyer would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 - $8000 = $1500)
4. Is there an income restriction?
Yes. The income restriction is based on the tax filing status the home buyer claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) can apply for the tax credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.
5. What if I worked out of the US for part of the year?
Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI. Speak to one of our Goldendale real estate agents for more information on this.
6. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?
Not always. The credit phases-out between $75,000 - $95,000 for singles and $150,000 - $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).
7. What’s the definition of “principal residence?”
Generally, a principal or primary residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.
8. Does the home must be purchased in the US?
Yes. The home must be located in the United States. Homes and real estate outside the US are not eligible. Start to take a look at the homes in the Goldendale real estate area now!
9. Are there restrictions on my financing for the mortgage on the property?
In 2009, most financing arrangements are acceptable and will not affect eligibility for the tax credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, buyers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser.
10. How do I apply for the tax credit?
There is no pre-purchase authorization, application or similar approval process. All eligible buyers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.
16. Can I use the tax credit as a downpayment for the real estate?
No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require difficult proceedures that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.
For more information on this tax credit and how you can qualify contact our agents today. We have homes in your price range and with such great deals and rates now, there is no better time to buy Goldendale real estate.
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