Email Us

Home Page

Your Personal Taxes

Tax News You Can Use

Our Newsletter

Itemized Deductions

Federal Tax Deduction Amounts

 Business Accounting & Taxes

Financial Services

About Our Staff

Map 

 The contents of this website do not constitute a professional service.  Always consult with a competent professional for advice on tax, accounting and other financial matters specific to your situation.  If you wish to engage our firm for this purpose, please contact our office.
 

Date last modified: 01/11/10
 

Home Buyer Credits

First-Time Home Buyer Credit

This is a refundable credit, based on the purchase of a taxpayer’s primary residence.  The credit is equal to the lesser of $8,000 or 10% of the home’s purchase price.  The credit does not have to be paid back to the federal government.  Home purchases closed between January 1, 2009 and April 30, 2010 may qualify for the credit.  When a binding contract is in place by April 30, then purchases closed by June 30, 2010 may also qualify.  If the home is being constructed, the “purchase date” is when the taxpayer first occupies the home.  Eligible home purchases can be claimed on an amended 2008 tax return, original or amended 2009 return or a 2010 return.

A first-time home buyer is someone who has not owned a home for three years prior to the purchase date of the current home.  This restriction applies to both spouses.  The home cannot be purchased from a close relative (parent, grandparent, child, etc.).  In-laws are also excluded for homes purchased after November 6, 2009. 

There are some additional restrictions on homes purchased after November 6 -- dependents are not eligible to claim the credit, no credit is available for homes with a purchase price over $800,000 and the purchaser must be 18 or older on the date of closing.

The credit is reduced or eliminated for certain higher-income taxpayers.  For homes closed prior to November 7, 2009, the credit begins to phase out for a married filing joint couple with income over $150,000, and over $75,000 for single taxpayers.  The phase out for homes closed after November 6 begins at $225,000 for married filing joint and $125,000 for other taxpayers.

If the taxpayer stops using the home as his/her primary residence within 36 months of the date of closing, then the full amount of the credit must be repaid when that year's tax return is due.  There are some exceptions to the repayment rule that cover death, divorce and sale of residence.  The repayment will not come out of escrow.  It must be “paid” on the tax return.

To document the purchase, the HUD-1 Closing Settlement Statement must be sent into the IRS.  For homes purchased after November 6, 2009, the IRS will require additional paperwork to verify the taxpayer is eligible to claim the credit.  Taxpayers will have to demonstrate they use the home as their primary residence by producing legal documents and utility bills with their new address.  In addition, these tax returns cannot be electronically-filed with the IRS.

Existing Home Buyer Credit

Taxpayers who do not qualify for the first-time home buyer credit may be eligible for this credit.  Taxpayers who have owned a primary residence within the eight years prior to the closing date of the newly-purchased home AND have occupied it for five consecutive years in that eight-year period, may qualify for a credit of the lesser of $6,500 or 10% of the purchase price.  If taxpayers are married, the eight-year/five-year qualifying period must be met by both taxpayers.

Home purchases closed after November 6, 2009 and by April 30, 2010 are eligible.  Binding purchase contracts in place by April 30, 2010 extend the eligibility to home purchases closed by June 30, 2010.  The income phase-out limits are the same as the first-time home buyer credit.  Taxpayers applying for the credit will have to submit the same paperwork to the IRS and will not be able to file their 2009 returns electronically.