Buy A Home in 2009 and Save on Your Taxes
Kathy Riggs March 1st, 2009
If you are a first time homebuyer, 2009 is the time to grab your part of the American dream. Interest rates are low and Congress has just passed the First-Time Homebuyer Tax Credit. First time homebuyers are eligible for up to an $8,000 tax credit with no re-payment if they purchase a home between January 1, 2009 and before December 1, 2009.
Purchase means title has transferred from seller to buyer so all 2009 purchases must close before December 1, to be eligible. Only first time buyers are eligible and to be considered a first time buyer, the purchaser must not have had any ownership interest in a home in the three years previous to the day of the 2009 purchase.
Any home purchased for $80,000 or more will be eligible for the entire $8,000 credit. Homes purchased for less than $80,000 will receive a tax credit of 10 percent of the purchase price.
Tax credits work this way:
Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would calculate all the income items and exemptions and make all the calculations required to figure out his or her total tax due. Once the total tax owed has been computed, tax credits are applied to reduce the total tax. For example, if before taking any credits on a tax return a person has total tax liability of $9500, an $8,000 credit would wipe out all but $1500 of the tax due.
An income restriction does apply. Individuals filing form 1040 as Single are eligible for the credit if their income is no more than $75,000 and married couples who file a joint return may have income of no more than $150,000.
The tax credit is designed to stimulate home ownership. A recapture can apply if the purchaser sells the home within three years. (source: National Association of Realtors)
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