2009 First Time Home Buyer Tax Credit

I personally was not sure exactly how this credit works so I did some digging and summarized it here for us in simple terms. Digging through tax law is rarely fun but in this case certainly worth the financial reward.

Here are my findings:

• Amount of credit: 10% of the purchase price up to $8,000
• It does not have to be repaid!!
  
• Types of homes: Single family, condo/townhouse, mobile, and houseboats
• Income cutoff: $75,000 single, $150,000 married (phases out starting at these levels)
• Refundable: Yes. If the credit exceeds the tax you owe you get a check for the difference!
• Purchase timeline: Between Jan 1, 2009 and Dec 1, 2009. Must be closed by this date!!
• Only for new home buyers: Neither you or spouse can have bought a home in the last 3 years.
• You must keep the home for 3 years after purchase in order to no have to pay it back
• You can get a loan for the credit now to pay closing costs and FHA 3.5% down payment.
• You can apply the tax credit toward your 2008 return if you so choose.
• You can base the credit on your 2008 income if you are subjected to above phase out.

You have to file IRS form 5405 to claim the credit on your tax return. This is also where you calculate the amount of credit you will receive.

As always consult a tax advisor to calculate your credit and if any of the above rules would help you get more money.