Wednesday, September 24, 2008

First Time Homebuyers Tax Credit

The recently enacted Housing and Economic Recovery Act of 2008 has created a tax credit that all "First Time Homebuyers" should plan on taking advantage of. This credit applies to all homes purchased after April 8, 2008 and before July 1, 2009 and can reduce a taxpayer's tax bill or increase their refund dollar for dollar. This credit will even be paid out to eligible taxpayers even if they owe no tax or the or the credit is more than the tax they owe. So how much is this credit?

Up to $7500.00!!!

More specifically the credit is ten percent of the house value with a maximum credit amount of $7,500 for a single person or married couple filing jointly or $3,750 for a married person filing separately. This applies to a primary residence within the United States only. You can also qualify if you have not owned a primary residence within the last three years even if you are not a first-time homebuyer. There are also some income parameters set in place that can keep you from qualifying so make sure you know all the details about this tax credit to see if you qualify.

Basically, you are given up to $7,500 which you will pay back over 15 yeas with no interest. If you qualify for the maximum you will file for the tax credit on your 2008 tax return. Subsequently, your payments each year (starting in 2010) will be one-fifteenth of the amount of your tax credit. At the maximum amount this would simply be a $500 payment each year using the new IRS form 5405 filed along with your annual returns. So if you have recently purchased a home or are considering purchasing a home and wonder if you qualify for this program please make sure you consult a tax professional.

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