Tax credit available for first-time home buyers
Tax payers who are considering purchasing their first home in 2009 should be aware of a new tax credit that is available.
In February 2009, Congress passed the American Recovery and Reinvestment Act. This legislation provides first-time homebuyers with a tax credit of 10 percent of the purchase price of a home up to $8,000, or $4,000 each for married couples who file separate returns. The amount of credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000 for individuals or $150,000 for joint filers. You are considered a first-time homebuyer if you did not own a home during the last three years.
"In order to be eligible for the tax credit, qualifying taxpayers must purchase a home by Dec. 1," said Eileen St. Pierre, Oklahoma State University Cooperative Extension personal finance specialist. "Homes that are for sale through a real estate agent, or those for sale by owner, are qualifying first-time homes. However, individuals who purchase a home from a family member are not eligible for the tax credit."
Prospective homebuyers have several filing options available to them. Although time is short, there is still time to include the first-time homebuyer credit on 2008 returns if you plan to purchase a home within the next few months.
"If you haven't yet filed your taxes, but do plan to purchase your first home in the next few months, you may want to consider requesting an extension from the Internal Revenue Service," St. Pierre said. "The benefit of putting the tax credit on your 2008 return is that you'll get your money faster. An extension is good for six months, so your 2008 return could be filed as late at Oct. 15. However, a request for an extension must be filed by April 15."
Taxpayers who already may be receiving a sizeable refund may want to wait and claim the credit on their 2009 return. Amended returns also may be submitted if a taxpayer has already filed a 2008 return but plans to purchase a home by Dec. 1.
St. Pierre noted that this credit should not be confused with the tax credit offered to first-time homebuyers in 2008. The 2008 credit gave taxpayers what amounts to an interest-free loan equal to 10 percent of the purchase price of a home up to $7,500, or $3,750 for married couples filing individually.
"These funds must be paid back to the government over 15 years beginning in the 2010 tax year," she said. "Funds need to be paid back earlier if the home is sold before the entire loan is repaid. This new tax credit approved earlier this year is strictly a tax credit and doesn't have to be repaid as long as the home remains the taxpayer's primary residence for 36 months after the purchase date."
You need to file Form 5405 to claim the credit. To download this form and for more information on the first-time homebuyer tax credit, visit the IRS website at www.irs.gov. For help with this topic or ways to better manage your money, contact your local OSU Extension office.