Home Buyer $8,000 Tax Credit – Expires April 30th, 2010

The extension is part of a $24 billion economic stimulus bill that will extend the $8,000 tax credit for homebuyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to homeowners who have lived in their current home for at least five years and are seeking to relocate.

The First-Time Homebuyer Tax Credit at a Glance

Who is Eligible
-First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program.
A tax credit of up to $8,000 is available for qualified
first-time buyers purchasing a principal residence on
or after January 1, 2009 and before April 30th, 2010.

The tax credit is for first-time home buyers only. For the tax
credit program, the IRS defines a first-time home buyer as
someone who has not owned a principal residence during the
three-year period prior to the purchase.

• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s
purchase price up to a maximum of $8,000.
• Single taxpayers with incomes up to $125,000 and married
couples with incomes up to $225,000 qualify for the full tax
credit.

How do I claim the tax credit?
Do I need to complete a form or application?

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on

Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you should be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.

Is a tax credit the same as a tax deduction?

No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

Are there any income limits for claiming the tax credit?

Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for
married taxpayers filing a joint return. The tax credit amount is reduced for
buyers with a modified adjusted gross income (MAGI) of more than $125,000 for
single taxpayers and $225,000 for married taxpayers filing a joint return.

Consult www.irs.gov or your tax advisor for additional information.