Property Management Nation

The deadline for the first-time home buyer tax credit for 2009 is fast approaching.  Many people are wondering how to take advantage of this credit and who it applies to.  Here are some facts you should know.

• The credit applies to first-time home buyers only
• This includes people who have not owned a principal residence in at least 3 years
• The credit is for principle residences and the property must be used as such for 3 years after purchase
• Your spouse also must be a first-time buyer if you file taxes jointly
• The credit is good for purchases between January 1, 2009 and December 1, 2009
• The purchase date is considered the day the closing occurs and title is transferred
• The credit is equal to 10% of the purchase price up to $8,000 depending on your income
• The income limit for a single person is $75,000 and for married people it is $150,000
• If you have a Modified Adjusted Gross Income (MAGI) of more than $95,000 single or $170,000 married you do not qualify
• If your MAGI is below this and above the income limit you may still qualify and have to use the phaseout range of $20,000 (subtract your overage, divide the phaseout, subtract from 1.0 and multiply by $8,000 to find your credit amount)
• Your Adjusted Gross Income or AGI is your total income for a year minus certain deductions or adjustments
• Your AGI is the last number on page one of your 1040 or 1040A or the first number on page 2
• Your AGI includes all forms of income including salaries, wages, dividends, interest and capital gains
• For more about MAGI and AGI see IRS form 5405
• To claim your credit on your federal income tax return use IRS form 5405 or claim on line 67 of your 2009 1040 form
• No pre-approval is necessary for the tax credit
• The credit is good for ANY type of principal residence
• You cannot purchase the residence from your ancestors or lineal descendants or spouse
• The credit is not good for intended purchases, it must be on completed purchases only
• You can construct a residence on a previously owned lot, you just must occupy the residence in the timeline
• The credit is considered refundable meaning it can still be claimed if you have little or no federal income to offset
• If you bought a house in early 2009 and already applied for the 2008 credit you can still apply for the 2009 credit by filing an amended 2008 return with a 1040X form
• If you buy a residence under a Mortgage Revenue Bond (MRB) program you are still eligible but not if you used the MRB program in 2008
• You cannot claim the credit if you live in the District of Columbia and file for the Washington D.C. credit
• If you are a nonresident alien you may still qualify (see IRS publication 519 for the definition of nonresident alien)
• You can file to apply the credit to your 2008 return or whichever year (2008 or 2009) yields the larger credit amount
• If using a FHA insured mortgage you can apply the credit toward your closing costs and down payment instead of waiting to file your federal tax return
• The tax credit is different from a deduction in that the credit is dollar for dollar and a reduction of what is owed

This first-time home buyer tax credit is different from the Congress credit from July of 2008 in that is does NOT have to be repaid.  The July 2008 credit was more of an interest-free loan in that is had to be paid back.  There is some talk on the Hill that the first-time home owner tax credit will be extended for 6 to 12 months due to its success.  There is even talk that it will be increased to $15,000 and will include previous homeowners as well.  At this point there are a lot of pressing issues in Congress so this is all speculation.  If you don’t want to miss out on the tax credit and are eligible now you should take it.