Earlier this year Congress passed the 2009 Economic Recovery Package. In this bill, Congress included a tax credit for first time home buyers. In my last post I talked about one program for first time home buyers (HPAP) and now I’m going to talk about a federal program meant to promote home buying.
The tax credit is for up to $8,000 or 10% of the cost of the house – whichever is lower - and unlike previous similar programs, this one does not need to be repaid. So for instance if you were buying a condo for $50,000 you would qualify for $5,000, but if you were buying a townhouse for $300,000 you would qualify for the full $8,000. This is only for first time home buyers who are buying a principle residency, aka not for the house on the Bay that you’re looking to purchase, and not for other investment properties either.
There are certain qualifiers, such as the closing date must be between January 1, 2009 and December 1, 2009. Additionally, there are income qualifications. To receive the whole $8,000, you must be a single person who earns $75,000 or less, and if you’re a married couple, the income must be $150,000 or less. To get a scaled down version of the credit a single person can make between $75,000 and $95,000 and a married couple can make between $150,000 and $170,000. If you are a single person making more than $95,000 or a married couple making more than $170,000, you are not eligible for the credit.
The tax credit is applied dollar for dollar. If your tax liability is less than the amount of the credit, you can receive the full credit. However, you must own the house for three years or more with exceptions for death and divorce, otherwise, if you sell it will be captured in the selling amount.
While I'm always open to answer any questions, please consult a professional regarding specific tax issues
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2 comments:
Is the income limit basic gross income, or taxable income (i.e. after health insurance, etc.), or federal adjusted taxable income?
My research from the IRS website shows that the amount of the credit begins to phase out for taxpayers whose MODIFIED ADJUSTED GROSS INCOME is more than $75,000, or $150,000 for joint filers. (MAGI is the last number on the first page of your form 1040).
As always I would encourage you to speak with a tax professional, and e-mail me if you would like a recommendation.
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