This page describes how the mortgage relief tax credit effects the first time home buyer.
Who is Eligible:
The $7,500 tax credit is available for first-time home buyer only.
The law defines a first-time home buyer as a buyer who has not owned a home during the past three years
All U.S. Citizens who file taxes are eligible to participate in the program
Home buyers who file as single or head-of-household taxpayers can claim the full $7,500 credit if their annual gross income (AGI) is less than %75,000.
For married couples filing a joint return, the income limit doubles to $150,000.
Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit.
Married couple who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.
The credit is not available for single taxpayers whose AGI is greater than $95,000 and married couples with an AGI that exceeds $170,000.
Effective Dates for the Tax Credit:
First time home buyers would receive a $7,500 tax credit for the purchase of any home on or after April 9, 2008 and before July, 2009. To qualify, you must actually close on the sale of the home during this period.
Tax Credit is Refundable:
A refundable credit means that if you pay less than $7,500 in federal income taxes, then the government will write you a check for the difference.
For example, if you own $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government.
If you are due to receive a $1,000 tax refund from the government, your refund would grow to $8,750 ($1,000 plus $7,500 from the home buyer tax credit).
Buyers can take the tax credit in their 2008 and 2009 tax refund.
If you purchased the home in 2008, the credit is taken on your 2008 tax return. If you buy in 2009, you have the option of taking the credit on y our 2008 or your 2009 tax returns.
Types of homes that Qualify for the Tax Credit:
All homes, whether single family, town homes or condominiums will qualify, provided that the home will be used as a principal residence and the buyer has not owned a home in the prior three years. This also includes newly constructed homes.
The tax credit essentially services as an interest free loan to be repaid over 15 years.
for example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. If the home owner sold the home, then the remaining credit would be due from the profit of the home sale.
If there was insufficient profit, then the remaining credit payback would be forgiven.
If you’re looking to buy and want to take advantage of this great program please contact us here or call Derrick at (612) 282-7653.
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