In order to qualify for the credit, this needs to be your first home purchase and the closing date needs to be between January 1st 2009 and December 1st 2009.
You need to be a first time home buyer. The definition of a first time home buyer is that you have not owned a home three years prior to the purchase of this home. If you are married, both you and your wife are considered. So, for example you had just gotten married this year, and your wife owned a home prior to your marriage, you would not qualify for the credit.
The credit is equivalent to 10% of the purchase price of the house, not to exceed $8,000. There is an income limit for a single person, $75,000 and phased out at $95,000. For a married couple the limit is $150,000 and phased out at $170,000.
You must live in the home for three years or you face recapture of the credit.
You do not get $8,000 in cash. You will either have any tax liability offset, or receive a refund check from the government.
You claim the tax credit on your federal income tax return for 2009. Specifically, home buyers should complete IRS Form 5405 http://www.irs.gov/pub/irs-pdf/f5405.pdf to determine your tax credit amount, and then claim this amount on Line 69 of your 1040 income tax return. No other applications or forms are required, and no approvable is necessary. However, you will want to be sure that you qualify for the credit under the income limits and part-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.
The credit is also refundable. This means the home buyer credit can be claimed even if you have little or no federal income tax liability. For example, if you had a federal tax liability of $6,000 and had $4,000 withheld, then without the tax credit, you would owe the government $2,000. Now if you qualify for the credit, you would receive a check for $6,000. $8,000 - $2,000. Or, if you are absolutely sure you qualify for the credit, you can reduce your income tax withholding up to the amount of the credit so you can take more money home in each paycheck.
There are some other fine nuances in the law. If you feel your situation is complicated, or are not sure how to apply for the credit, I suggest you contact a tax professional.
· 9 years ago