$8000 first time home buyer tax credit.
The new stimulus plan allows all first time home buyers to be eligible for an $8000 tax credit when buying a home. First-time homebuyers who purchase a home between January 1, 2009 and November 30 , 2009 may be eligible for a tax credit of $8,000 or 10% of the purchase price, whichever is lower. Unlike its $7,500 predecessor, the $8,000 does not need to be repaid.
Tax Credit vs. Tax Deduction
This is a tax credit, not a tax deduction, meaning its a dollar-for-dollar decrease to your tax liability. Also, the tax credit is refundable, meaning you can receive the full value of the credit even if you do not have an $8,000 tax liability.
For example assuming you qualify and you normally get a $2000 return every year you would get $10,000 from Uncle Sam. Great Deal.
Phase-Out
The tax credit phases-out for individuals making $75,000 or over modified adjusted gross income (MAGI), and couples making $150,000 or over MAGI. Below are examples of how the phase-out will apply to the two different scenarios.
Individual Making $75,000 or Over
Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Couple Making $150,000 or Over
Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Who Cannot Take the Tax Credit
If any of the following apply, you cannot take the tax credit:
1. Individuals making $95,000 or over MAGI, and couples making $170,000 or over MAGI; meaning you receive no tax credit if your income is this much or more a year.
2. You buy your home from a close relative, including: parent, sibling, spouse, grandparent, child, etc.
3. You sell your home within the first three years of purchasing it. If this occurs, the tax credit must be repaid.
4. You are a non-resident alien
First-time Homebuyer Definition
A first-time homebuyer is defined as someone who has not owned a home within the last three years. If married filing jointly, both spouses must meet the first-time homebuyer definition to take the tax credit.
When Can the Tax Credit be Claimed?
The $8,000 tax credit can be claimed for your 2008 tax year (filed by April 15th 2009), 2008 amended return or 2009 tax year.
Homes That Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify. For new construction, the purchase date is considered the day you occupy the home; therefore you must move-in by November 30th 2009 to qualify for the tax credit.
How About Those Who Purchased Homes in 2008?
Homes purchased in 2008 are subject to the $7,500 repayable tax credit.
First time homebuyers eligible for $7500 interest free loan from US Government, If bought in 2008.
First-time homebuyers should begin planning now to take advantage of a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008.
Available for a limited time only, the credit:
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Applies to home purchases after April 8, 2008, and before July 1, 2009.
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Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
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Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.
However, the credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.
Eligible taxpayers will claim the credit on new IRS Form 5405. This form, along with further instructions on claiming the first-time homebuyer credit, will be included in 2008 tax forms and instructions and be available later this year on IRS.gov, the IRS Web site.
If you bought a home recently, or are considering buying one, the following questions and answers may help you determine whether you qualify for the credit.
Q. Which home purchases qualify for the first-time homebuyer credit?
A. Only the purchase of a main home located in the United States qualifies and only for a limited time. Vacation homes and rental property are not eligible. You must buy the home after April 8, 2008, and before July 1, 2009. For a home that you construct, the purchase date is the first date you occupy the home.
Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.
If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 (or amended 2008 return) or 2009 return.
Q. How much is the credit?
A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $75,000 or more. Whatever the size of the credit a taxpayer receives, the credit must be repaid over a 15-year period.
Q. Are there income limits?
A. Yes. The credit is reduced or eliminated for higher-income taxpayers.
The credit is phased out based on your modified adjusted gross income (MAGI). MAGI is your adjusted gross income plus various amounts excluded from income—for example, certain foreign income. For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000.
This means the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.
Q. Who cannot take the credit?
A. If any of the following describe you, you cannot take the credit, even if you buy a main home:
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Your income exceeds the phase-out range. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
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You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
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You stop using your home as your main home.
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You sell your home before the end of the year.
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You are a nonresident alien.
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You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.
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Your home financing comes from tax-exempt mortgage revenue bonds.
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You owned another main home at any time during the three years prior to the date of purchase. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another main home at any time from July 2, 2005, through July 1, 2008.
Q. How and when is the credit repaid?
A. The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year. For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.
You may need to adjust your withholding or make quarterly estimated tax payments to ensure you are not under-withheld.
However, some exceptions apply to the repayment rule. They include:
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If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount.
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If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property. There are special rules for involuntary conversions. Taxpayers are urged to consult a professional to determine the tax consequences of an involuntary conversion.
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If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.
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If you transfer your home to your spouse, or, as part of a divorce settlement, to your former spouse, that person is responsible for making all subsequent installment payments.
Let Us Help You Find Your Next Home
The Royal Oak housing market is in demand right now. Many factors are responsible for the growth of this community; the location, being conveniently located to 1-75 and 696 makes commute time quicker and resale an attractive option to home buyers. The lack of new homes in the area will continue to allow Royal Oak to appreciate. Many communities in southeast Michigan have seen new home construction kill existing home values. And finally the area offers many things to do mainly for the younger adult population. The nightlife, dining and feel of a midtown locale offers endless entertainment and excitement
Reduce Home Buying Stress
Buying a home is stressful for many couples. Not only are they making decisions that will affect their lives for years to come, they are also being asked to make them under less-than-perfect circumstances - like an uncertain housing market.
Psychologist Linda Sapadin offers three stress minimizers to homebuying couples:
Don't turn on each other. "Recognize that this is a stressful process, and if you blame the other person, then what you usually get is counter-blame," she says. "So it's much better to put the blame on the process."
Don't expect perfection. "You want to assume that things are not going to go perfectly, that there's going to be some unexpected difficulties, expenses, problems to solve," Sapadin says, "so just know that up-front."
Speak to supporters before you speak to your critics. "There could be one relative who says, 'What?! You're spending that much money?' or 'You're moving there?' Don't tell that person until you and your partner are united," Sapadin says. "If there's some part of you that is uncertain, you don't want to undermine that uncertainty by speaking to your critics."
