First-Time
Homebuyer Credit Provides Tax Benefits to 1.4 Million Families
to Date,
More Claims Expected
IR-2009-83, Sept.
17, 2009
WASHINGTON
— With the deadline quickly approaching, the Internal Revenue
Service today reminded potential homebuyers they must complete
their first-time home purchases before Dec. 1 to qualify for
the special first-time homebuyer credit. The American Recovery
and Reinvestment Act extended the tax credit, which has provided
a tax benefit to more than 1.4 million taxpayers so far.
The
credit of up to $8,000 is generally available to homebuyers
with qualifying income levels who have never owned a home or
have not owned one in the past three years. The IRS has a new
YouTube
video and other
resources that explain the credit in detail.
The
IRS encouraged all eligible homebuyers to take advantage of
the first-time homebuyer credit but at the same time cautioned
taxpayers to avoid schemes that help ineligible people file
false claims for the credit. Currently, the agency is investigating
a number of cases of potential fraud and is using computer screening
tools to identify questionable claims for the credit.
Because
the credit is only in effect for a limited time, those considering
buying a home must act soon to qualify for the credit. Under
the Recovery Act, an eligible home purchase must be completed
before Dec. 1, 2009. This means that the last day to close on
a home is Nov. 30.
The
credit cannot be claimed until after the purchase is completed.
For purchases made this year before Dec. 1, taxpayers have the
option of claiming the credit on their 2008 returns or waiting
until next year and claiming it on their 2009 returns.
For
those considering a home purchase this fall, here are some other
details about the first-time homebuyer credit:
The
credit is 10 percent of the purchase price of the home, with
a maximum available credit of $8,000 for either a single taxpayer
or a married couple filing jointly. The limit is $4,000 for
a married person filing a separate return. In most cases, the
full credit will be available for homes costing $80,000 or more.
The credit reduces the taxpayer’s tax bill or increases
his or her refund, dollar for dollar. Unlike most tax credits,
the first-time homebuyer credit is fully refundable. This means
that the credit will be paid to eligible taxpayers, even if
they owe no tax or the credit is more than the tax owed.
Only the purchase of a main home located in the United States
qualifies. Vacation homes and rental properties are not eligible.
A home constructed by the taxpayer only qualifies for the credit
if the taxpayer occupies it before Dec. 1, 2009.
The credit is reduced or eliminated for higher-income taxpayers.
The credit is phased out based on the taxpayer’s modified
adjusted gross income (MAGI). MAGI is adjusted gross income
plus various amounts excluded from income—for example,
certain foreign income. For a married couple filing a joint
return, the phase-out range is $150,000 to $170,000. For other
taxpayers, the range is $75,000 to $95,000. This means the full
credit is available for married couples filing a joint return
whose MAGI is $150,000 or less and for other taxpayers whose
MAGI is $75,000 or less.
The credit must be repaid if, within three years of purchase,
the home ceases to be the taxpayer’s main home. For example,
a taxpayer who claims the credit based on a qualifying purchase
on Sept. 1, 2009, must repay the full credit if he or she sells
the home or converts it to business or rental use at any time
before Sept. 1, 2012.
Taxpayers cannot take the credit even if they buy a main home
before Dec. 1 if:
The
taxpayer’s income is too large. This means joint filers
with MAGI of $170,000 and above and other taxpayers with MAGI
of $95,000 and above.
The taxpayer buys a home from a close relative. This includes
a home purchased from the taxpayer’s spouse, parent, grandparent,
child or grandchild.
The taxpayer owned another main home at any time during the
three years prior to the date of purchase. For a married couple
filing a joint return, this requirement applies to both spouses.
For example, if the taxpayer bought a home on Sept. 1, 2009,
the taxpayer cannot take the credit for that home if he or she
owned, or had an ownership interest in, another main home at
any time from Sept. 2, 2006, through Sept. 1, 2009.
The taxpayer is a nonresident alien.
from
irs.gov
