Home Buyer Tax Credit
Did you purchase a house between January 1 and April 30, 2010? If so, then you may qualify for one of the two tax credits: the first-time home buyer tax credit and the repeat home buyer tax credit.
Home Buyer Tax Credit | First time home buyer
The first-time home buyer tax credit is worth 10% of the purchase price of the home up to a maximum of $8,000. Eligibility for the first-time home buyer tax credit means that you would have to have not owned a principal residence in the three years before the new home purchase.
Home Buyer Tax Credit | Repeat home buyer
The repeat home buyer tax credit is worth up to 10% of the purchase price, up to a maximum of $6,500. Eligibility for the repeat home buyer tax credit means that would have to have owned and lived in the same home for at least five consecutive years.
Home Buyer Tax Credit | Qualifications
First, to qualify for the home buyer tax credit, the price of the property must be under $800,000. Second, in order to claim the tax credit on your 2010 taxes, you must have signed a contract to purchase the home by May 1, 2010 with an original closing date of June 30, and an actual close date by or before September 30, 2010. To be financially eligible for the home buyer tax credit, your modified adjusted gross income (MAGI) had to be less than $125,000 for single people or $225,000 for joint filers. A reduced credit is available for home buyers with MAGI of up to $145,000, or $245,000 for married homeowners.
Home Buyer Tax Credit | Documents needed
A copy of your settlement statement, or HUD-1 that was provided at closing.
For newly constructed homes, a dated copy of the certificate of occupancy that shows your name and the address of the home.
For repeat buyers, copies of documents showing that you lived in your previous residence for five consecutive years during the past eight years. Acceptable documents include mortgage interest statements, property tax records or homeowners insurance statements.
Once you file for the tax credit, expect to wait up to 6 weeks to receive your check from the IRS.
Home Buyer Tax Credit | 2008 Payback
The Housing and Economic Recovery Act of 2008 provided up to a $7,500 interest free loan with a two year grace period in the form of a refundable tax credit for qualified first-time homebuyers of a principal residence in 2008. Now that 2010 has passed, it is time to start paying the interest free loan back.
The tax credit in 2008 was actually a 15 year interest free loan with a 2 year grace period. To calculate what you owe, divide whatever tax credit amount you received in 2008 by 15, and that is the amount you will have to pay back.
For example, if you qualified for the full $7,500 tax credit, then you would have to repay $500 per year for the next 15 years.
If you bought your house in 2008 and have re-sold it, then you will owe even more, because you will be required to repay the entire amount of the interest free loan, or the tax credit, back all at once.
Home Buyer Tax Credit | Conclusion
If you purchased a home in 2010, you may be eligible for the home buyer tax credit if the property value was less than $800,000, if you met the definition of a first time or repeat home buyer, and if your MAGI income was within the proper range. When you file your taxes, bring the appropriate documentation with you and you should be able to qualify If you took advantage of the home buyer tax credit in 2008, you will have to start repaying the loan, but if you qualified for the home buyer tax credit in 2009 or 2010, you do not have to pay anything back.
For more articles by Tom Bukacek, please visit www.REMillionaireBlueprint.com