The Housing and Economic Recovery Act of 2008 authorizes a tax credit up to $7,500 for qualified first-time home buyers purchasing a home on or after April 9, 2008 and before July 1, 2009. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. The tax credit is like an interest-free loan and must be repaid over a 15-year period. I am going to attempt to answer some of the more frequent questions here and the next posts.
How is a “first-time home buyer” defined? A “first-time home buyer” as defined by law is a buyer who has not owned a principal residence during the three-year period prior to the purchase. If you are a married couple looking to take advantage of this tax credit, you need to be aware that the law has determined that if either you or your spouse have owned a home in the three-year time frame prior to this purchase, neither of you will qualify for the first-time home buyer tax credit. For instance, if your spouse has not ever owned a home, but you owned a home as a primary residence within the past three years, neither of you qualify for the first-time home buyer tax credit. However, if either or both of you owned a vacation home or rental property that was not used as a primary residence, you would both qualify for the tax credit.
Who is eligible to claim the $7,500 credit? Any first-time home buyer purchasing a newly constructed home or a previously owned home is eligible for the tax credit. The home must be purchased between April 9, 2008 and before July 1, 2009. The dates refer to the date the closing occurs.
How can I claim the tax credit? You claim the tax credit on your federal income tax return. There are no other forms or applications needed. However, you will want to be sure that you qualify for the credit under the income limits and you must past the definition of the “first-time home buyer”.
What types of homes qualify for the tax credit? Any home purchased as a “primary residence” will qualify: single family detached homes-whether new or previously owned-attached homes such as town houses, condominiums, manufactured homes and house boats.
What if I hire a contractor to build a home on a lot that I already own? A principal residence constructed by the home owner is treated by the tax code as having been purchased on the date the owner first occupies the house. In this situation, the date of first occupancy must be between April 9, 2008 and before July 1, 2009. If you purchase a “new construction” home from a builder, the eligibility for the tax credit is determined by the closing/settlement date.
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