Good news for potential home buyers from Uncle Sam! In an attempt to further stimulate the housing market Congress has extended the First Time Home Buyer Tax Credit and created what some are calling the Move Up Buyer Tax Credit. This is a great incentive if you are on the hunt for a new house. Some information about the tax credits:
Move-Up Buyer Tax Credit
Qualified Move-up or repeat home buyers purchasing any kind of home are eligible to claim the $6,500 tax credit.
A move-up buyer is a home owner who has owned and resided in a home for at least 5 consecutive years of the eight years prior to the purchase date. If married both spouses homeownership are tested.
The tax credit is equal to 10% of the home’s purchase price up to a MAX of $6,500.
The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return.
The previous tax credits applied only to first-time home buyers and were for different amounts of money.
The tax credit is claimed on the federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 7 of the 1040 income tax form for 2009 returns.
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single family detached homes, attached homes like townhouses and condominiums, manufactured homes, and houseboats.
The tax credit is refundable. This means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. This usually means the government will send the taxpayer a check for a portion of even the entire amount of the refundable tax credit.
A residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house.
The tax credit can be combined with an MRB (bond money) home buyer program.
Anyone who is not a nonresidential alien and who has owned and resided in a principal residence in the US for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits.
Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment.
The law allows taxpayers to elect to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on Dec. 31st, 2008 (or if in 2010, Dec. 31st, 2009). This means that the previous year’s income limit applies and the election accelerates when the credit can be claimed.
First Time Home Buyer $8000 Tax Credit Questions and IRS Answers
1. Can you take the credit if you buy a house in 2009, and file an extension to October 15th.
Yes IR-2009-27 http://www.irs.gov/newsroom/article/0,,id=205416,00.html March 18, 2009 states: Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before December 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year. The filing options to consider are: file an extension; file now, amend later; amend the 2008 tax; claim the credit in 2009 rather than 2008.
2. Can you take the credit on a mobile home with no land?
The Form 5405 does state that a main home is the one you live in most of the time. It can be a house, houseboat, house-trailer, cooperative apartment, condominium or other type of residence. It does not go into specifically if you have to own the land on which it is sitting.
3. If you have owned a mobile with no land in the last 3 years, does that exclude you from the credit?
The Form 5405 does state that a main home is the one you live in most of the time. It can be a house, houseboat, house-trailer, cooperative apartment, condominium or other type of residence. It does not go into specifically if you have to own the land on which it is sitting.
3. If you have owned a mobile with no land in the last 3 years, does that exclude you from the credit?
See question above.
4. What is the definition of a first time home buyer, i.e. how do you document you have not owned a home, is it not having taken any mortgage tax deduction on your last 3 years tax returns or what?
A first time home buyer is any individual (and spouse if married) who had no present ownership interest in a qualifying principal residence during the 3-year period ending on the date of purchase of the principal residence for which a first-time homebuyer credit is being claimed.
5. Is there anyway a child buying a house from a parent could get the tax credit?
No per the instructions on the Form 5405 http://www.irs.gov/pub/irs-pdf/f5405.pdf it states:
Who Cannot Claim the Credit
No per the instructions on the Form 5405 http://www.irs.gov/pub/irs-pdf/f5405.pdf it states:
Who Cannot Claim the Credit
A. Your modified adjusted gross income is $95,000 or more ($170,000 or more if married filing jointly).
C. You home financing comes from tax-exempt mortgage revenue bonds. This rule does not apply for a home purchased in 2009.
D. You are a nonresident alien.
E. Your home is located outside of the United States
F. You sell the home, or it ceases to be your main home before the end of 2008.
G. You acquired your home by gift or inheritance.
H. You acquired your home from a related person. A related person includes:
1. Your spouse, ancestors (parents, grandparents, etc), or lineal descendants (children, grandchildren, etc.).
2. A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation.
3. A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest.
F. You sell the home, or it ceases to be your main home before the end of 2008.
G. You acquired your home by gift or inheritance.
H. You acquired your home from a related person. A related person includes:
1. Your spouse, ancestors (parents, grandparents, etc), or lineal descendants (children, grandchildren, etc.).
2. A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation.
3. A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest.
6. Does the 5405 address these questions or what is the best web source with FAQ’s for us to refer our clients to?
The Form 5405 answers most questions but you can also check out our website www.irs.gov for the latest information on any issues concerning "First Time Home Buyers" by putting what you are wanting to search for in quotation marks it will limit the our search engine to that particular subject. Here is the link to our information center for both of the First Time Homebuyers credits with some FAQ's. http://www.irs.gov/newsroom/article/0,,id=187935,00.html
7. What form we use to report abuses of the $8000 tax credit.
The Form is 3949A http://www.irs.gov/pub/irs-pdf/f3949a.pdf 7. What form we use to report abuses of the $8000 tax credit.
Do you qualify for either of these credits? To find out if you qualify contact Steve Currington at 918-394-5626 or on the web at www.curringtonmortgage.com. You can email Steve at stevec@21dayclose.com
Interested in talking to a Realtor about listing your house? Contact Darryl Baskin with McGraw Realtors at 918-258-2600 or darryl@darrylbaskin.com
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