First and foremost, this is a tax credit, not a deduction. That is great news! More great news, home prices are lower than they have been in years. New home construction is at a remarkably low pace. In other words, while home prices may fall a little more, there is a lot of upside potential. Conversely, rents have held steady, at least where I live. If you have the down payment, or even if you have to scrounge it from parents/relatives this is a good time to buy a home and Uncle Sam is making it even better.
Here's how the credit works:
For eligible first-time home buyers who purchase a home on or after Jan. 1, 2009 and before Dec. 1, 2009, the first-time home buyer tax credit is now $8,000 and unlike eligible first-time home buyers in 2008, the qualified 2009 first-time home buyer no longer has to repay the credit unless the homeowner sells or moves out of the home within 3 years of purchase. This is BIG!
The tax credit is 10 percent of the purchase price of the home with a maximum credit of $8,000. The $8,000 credit begins to phase out for individuals with MAGI (modified adjusted gross income) over $75,000 and at $150,000 for married couples filing jointly. It is fully phased out for individuals with MAGI of $95,000 and at $170,000 for joint filers, half that amount for married persons filing separate returns.
Qualifications
In addition to income requirements for eligibility of the first-time homebuyer credit, there are some other things you should know to qualify for the credit:
- You (and your spouse, if married) cannot have owned a home in the three years prior to a purchase
- You cannot purchase your new home from a close relative including spouse, parent, grandparent, child or grandchild, though the purchase of a home from a sibling (brother or sister) does not disqualify you from claiming the credit; purchases from step-relatives are allowed for the credit as well
- You must purchase the home beginning Jan. 1, 2009 and before Dec. 1, 2009; for a home under construction, you must occupy the home before Dec. 1, 2009
- The home must be your principal residence; rental property and vacation homes do not qualify for the credit
- You are not eligible for the credit if you are a nonresident alien; for married couples filing jointly, one must be a U.S. citizen to qualify for the credit
- The credit does not apply to homes purchased and located in the U.S. Territories
- If you owned a principal residence outside of the U.S. within the last 3 years, and meet the other requirements, you are eligible to claim the first-time home buyer credit for a home purchase in the U.S.
As with any financial decision that has tax implications, the best advice is to always talk with your tax professional to determine a course of action that may be best for your individual financial situation.
HTH
Z
Disclosure under IRS Circular 230: To insure compliance with recently released Internal Revenue Rules, this communication was not written or intended to be relied on to avoid federal tax related penalties or for promoting, marketing or recommending to any party any tax related matters addressed herein.



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I don't trust my agent that much! Of course my agent is my dad so I know him well enough to say that.
I don't sweat
the other 5% .......................
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